Federal Budget May 2014

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1 Federal Budget May 2014 On 13 May 2014, the Abbott Government delivered its first Federal Budget. The announcements in this Update are proposals unless stated otherwise. These proposals need to successfully pass through Parliament before becoming law and may be subject to change during this process. After weeks of speculation, the Federal Treasurer Joe Hockey handed down the Government s first Budget which confirmed a number of previously announced measures. These included the introduction of a Temporary Budget Repair Levy on high income earners and an increase in the pension age to 70. However, the Budget also included a number of other significant savings measures which could impact a range of people across all income levels. These include: indexing the age pension to CPI changing eligibility to the Commonwealth Seniors Health Card tightening eligibility to family tax benefit payments abolishing a number of tax offsets, and pausing indexation of a number of payments and programs, including the Medicare Levy Surcharge and Private Health Insurance Rebate In addition, the Government also announced a number of important changes to superannuation, including changing the schedule for increasing the superannuation guarantee to 12% and allowing people to withdraw any excess non-concessional contributions made after 1 July It is important to note the Budget announcements are still only proposed at this stage and that, to be legislated under the new Senate, the Government will need the support of six of the record 18 crossbench Senators. Taxation Temporary Budget Repair Levy 1 July 2014 until 30 June July 2014 to 30 June 2017 The top marginal tax rate for individual taxpayers will increase by 2% to 47% (or 49% including Medicare levy) for 3 years commencing 1 July The increased top marginal tax rate will apply to taxable income earned in excess of $180,000 per annum. The levy amount expected to be paid by taxpayers with taxable income over $180,000 is summarised in the following table.

2 Taxable income Temporary Budget Repair Levy $200,000 $400 $250,000 $1,400 $300,000 $2,400 As the Temporary Budget Repair Levy is proposed to apply to taxable income, strategies which reduce taxable income will result in a reduction in the amount of levy payable. This can be achieved by either reducing assessable income or increasing deductible expenditure. It is also important to note that while the Temporary Budget Repair Levy is proposed to apply to high income earners, it could also potentially apply to people with income below $180,000 where they: - sell an asset and realise capital gains, or - take a superannuation lump sum benefit consisting of taxable component between the age of 55 and 59, as this amount will be included in the taxpayer s taxable income and could push the client over the $180,000 threshold. Taxpayers considering selling assets or taking superannuation lump sums between 1 July 2014 and 30 June 2017 may therefore need to take into account any additional levy they may incur as a result. Reminder: Increase in the Medicare Levy from 1 July 2014 As per the 2013 Budget, the Medicare Levy will increase from 1.5% to 2.0% from 1 July 2014 to provide funding for DisabilityCare Australia. This measure has already been legislated. Low income earners will continue to receive relief from the Medicare Levy through the low income thresholds for singles, families, seniors and pensioners. The current exemptions from the Medicare Levy will also remain in place, including for blind pensioners and sickness allowance recipients. Temporary increase in FBT rate 1 April 2015 The FBT rate will increase from 47% to 49% for the 3 FBT years commencing 1 April 2015, to prevent high income earners exchanging income for fringe benefits to avoid the Temporary Budget Repair Levy. Employees of public benevolent institutions, public and non-profit hospitals and certain other tax-exempt entities will have the cash value of exempt fringe benefits protected by increasing the annual FBT caps. The FBT rebate which applies to rebateable employers (e.g. non-profit child care providers, public education institutions and religious institutions) will be aligned with the FBT rate from 1 April 2015

3 Dependant Spouse Tax Offset to be abolished 1 July 2014 The Government will abolish the dependent spouse tax offset for all taxpayers from 1 July Therefore, the limited access to the DSTO to those whose dependent spouse was born before 1 July 1952 will no longer be available. Taxpayers that qualified for the Zone Tax Offset, the Overseas Civilians Tax Offset or Overseas Forces Tax Offset and that qualified for the DSTO may instead now qualify for the Dependent (Invalid and Carer) Tax Offset (DICTO) where eligible. Taxpayers with a dependant who is genuinely unable to work due to a care obligation or a disability may be eligible for the DICTO. Mature Age Workers 1 July 2014 Mature Age Workers Tax Offset abolished The Mature Age Worker Tax Offset will be abolished from 1 July Since 1 July 2012, the Mature Age Worker Tax Offset is only available to taxpayers born before 1 July 1957 in respect of taxable income from working. The definition of income includes wages, salary, reportable fringe benefits, reportable employer super contributions, business income and personal services income. Restart Programme The savings from abolishing the Mature Age Worker Tax Offset will be redirected to Restart a program to encourage employers to hire mature age job seekers (including those on the Disability Support Pension) aged 50 years or over. From 1July 2014, a payment of up to $10,000 will be available to employers who: hire a mature age job seeker who was previously unemployed for a minimum of 6 months; and the person is employed full-time for at least 6 months. Eligible employers will be paid in the following instalments: $3,000 after 6 months of employment; $3,000 after 12 months of employment; $2,000 after 18 months of employment; and $2,000 after 24 months of employment. Employers who hire mature age job seekers on a part-time basis will be eligible for a pro-rated subsidy. The hours worked to qualify as a part-time basis is indicated as:

4 a minimum of 15 hours per week as per Joe Hockey s Media Release Boosted wage subsidy for employers hiring Australians aged hours per week as per the Budget Overview. We will need to wait for further details to clarify the number of minimum hours that constitute working on a part-time basis. Company tax cuts 1 July 2015 The Government remains committed to cutting the company tax rate by 1.5% from 1 July For large companies, the reduction will offset the cost of the Government s Paid Parental Leave levy. With the reduction in the company tax rate, investors in companies earning less than $5 million may receive greater dividends but less franking credits, leaving them in the same net after tax position. However, for shareholders of companies with income of more than $5 million, the 1.5% reduction in tax will be offset by the 1.5% levy for the paid parental leave scheme. As a result, shareholders may receive the same level of dividends but less franking credits (assuming the levy is not franked), leaving them worse off. Repeal the mining and carbon tax The minerals resource rent tax (MRRT) and the carbon tax will be repealed. The Government estimates that the abolition of the carbon tax will save households, on average, $550 next year alone. The Energy Supplement and the associated tax cuts will be maintained. Indexation of the fuel excise 1 August 2014 The Government is reintroducing indexation of the fuel excise from 1 August An increase in fuel excise may be felt directly (prices paid for fuel) and indirectly (prices paid for goods and services). Note: Labor have stated they will oppose this indexation.

5 Paused indexation of thresholds for Medicare Levy Surcharge, Private Health Insurance Rebate and some Medicare Benefits Schedule fees 1 July 2015 The indexation of the Medicare Levy Surcharge and Private Health Insurance Rebate thresholds will be paused for 3 years from 1 July July 2014 Indexation of some Medicare Benefits Schedule (MBS) fees will be paused for 2 years from 1 July General practice MBS fees will be excluded and pathology and diagnostic imaging services which are not currently indexed, will not be affected. Medicare benefits patient contribution 1 July 2015 From 1 July 2015, patients may be required to contribute $7 per service, for: standard general practitioner consultations; out-of-hospital pathology; and diagnostic imaging services. The Government will reduce the Medicare Benefits Schedule (MBS) rebates by $5 for these services and allow providers to collect a patient contribution of $7 per service. The reduced MBS rebate will only apply to the first 10 services in a year provided to concession card holders and children under 16 years of age. This effectively means these patients will not have to pay a $7 patient contribution, after the first 10 services in a year. Current bulk billing incentives for providers of these services will be replaced by a new Low Gap incentive. The new incentive will be paid to providers, in respect of patients with concession cards or children under 16 years of age, where the provider only charges $7 for the first 10 services in a year, or charge no patient contribution for additional services in that year. You will pay $7 for each visit to a general practitioner. Concessional cardholders and children under 16 years of age will only pay $7 per visit for the first 10 visits in the year. Note: Labor have stated they will oppose this payment

6 Pharmaceutical Benefits Scheme (PBS) increase in co-payments and safety net thresholds 1 January 2015 PBS co-payments will increase for: general patients by $5 from $37.70 to $42.70 concessional patients by $0.80 from $6.10 to $6.90. PBS safety net thresholds will increase each year for 4 years from 1 January 2015 as follows: general safety net thresholds will increase by 10% each year; and concessional safety nets will increase by the cost of 2 prescriptions each year (from 60 prescriptions to 62 from 1 January 2015 and to 68 from 1 January 2018). These increases are in addition to the existing annual indexation of co-payments and safety net thresholds, in line with CPI. Medicare Safety Net 1 January 2016 A new Medicare Safety Net will replace the existing Original Medicare Safety Net, Extended Medicare Safety Net and Greatest Permissible Gap. The new Medicare Safety Net thresholds will be: Situation New Medicare Safety Net thresholds from 1 January 2016 Concessional singles & concessional families $400 Non-concessional singles & non-concessional FTB (Part A) families Non-concessional families who do not receive FTB (Part A) $700 $1,000 The Medicare Safety Net provides financial assistance towards out-of-pocket costs for Medicare eligible out-ofhospital services. Once the thresholds are reached in a calendar year, Medicare will pay 80% of any subsequent out-of-pocket costs, capped at 150% of the Medicare Benefits Schedule (MBS) fee. The out-of-pocket costs that accumulate to reaching those safety net thresholds will also be capped at 150% of the MBS fee. Increase the Medicare levy low-income thresholds for families 1 July 2013 The Government will increase the Medicare levy low-income phase-in threshold for families. The threshold for couples with no children will be increased to $34,367 (from $33,693 in ), the additional amount of threshold for each dependent child or student will also be increased to $3,156 (from $3,094 in ).

7 There will be no increase in the Medicare levy low-income thresholds for individuals ($20,542) and pensioners ($32,279 individual / $46,000 married or sole parent) which will remain at levels. Superannuation Option to withdraw excess non-concessional contributions from superannuation 1 July 2013 The Government has proposed that individuals will have the option to withdraw contributions made from 1 July 2013 that exceed their non-concessional contributions cap. Under this measure, associated earnings are also able to be withdrawn and taxed at the individual s marginal tax rate. Final details of the policy will be settled following consultation with key stakeholders in the superannuation industry. It is understood that individuals who do not withdraw their excess non concessional contributions will be subject to excess contribution tax at the top marginal tax rate on the amount of the excess. This proposal is good news as it will mean that clients who inadvertently exceed their non-concessional cap will have the ability to withdraw the excess amount rather than have it taxed at the top marginal rate. It also ensures the treatment of excess non-concessional contributions will be broadly consistent with the rules that apply to excess concessional contributions. Superannuation guarantee rate to increase to 9.5% - Change to schedule for increase to 12% 1 July 2014 The Government has announced that the superannuation guarantee (SG) rate will increase from 9.25% to 9.5% from 1 July 2014, as currently legislated, given the defeat of the Minerals Resource Rent Tax (MRRT) Repeal and Other Measures Bill 2013 in the Senate. However, the Government proposes to amend the schedule for SG to increase to 12% by freezing the SG rate at 9.5% from 1 July 2014 until 30 June 2018, and subsequently increasing the SG rate every year by 0.5% until it reaches 12% from 1 July The table below shows the scheduled increase as currently legislated, as proposed in the defeated MRRT Repeal and Other Measures Bill 2013, and under the new Government proposal.

8 Financial year SG rate 2010/11 Federal Budget, legislated 29 March 2012 Proposed SG rate defeated MRRT Repeal and Other Measures Bill 2013 Proposed SG rate 2014/15 Federal Budget 2012/13 9% 9% 9% 2013/ % 9.25% 9.25% 2014/15 9.5% 9.25% 9.5% 2015/16 10% 9.25% 9.5% 2016/ % 9.5% 9.5% 2017/18 11% 10% 9.5% 2018/ % 10.5% 10% 2019/20 12% 11% 10.5% 2020/21 12% 11.5% 11% 2021/22 12% 12% 11.5% 2022/23 12% 12% 12% This announcement gives employers and employees certainty that the SG rate will increase to 9.5% from 1 July 2014, allowing employers to prepare for the increase to their SG obligations, and giving time for employees salary sacrifice arrangements to be amended for the 2014/15 financial year to ensure they remain within their concessional contributions cap. However, the new proposal represents a further delay to the SG rate reaching 12% by another year compared to the Government s previous proposal, and represents a delay of 3 years compared to current legislation. Therefore, the new proposal will further reduce the SG entitlements of all employees until the SG rate reaches 12% from 1 July 2022 under the new proposal. Increased preservation age In response to the recommendation in the National Commission of Audit report for a phased increase to the superannuation preservation age, the Government has stated that this measure will be considered by the Financial Systems Inquiry and the Tax White Paper process. Social Security Increase Age Pension qualifying age to 70 years 1 July 2025 The Budget confirmed the Treasurer s earlier announcement that the age pension age will increase to age 70 by the year This means that those born on or after 1 January 1966 (currently 48 years of age or younger) will have to wait until they are 70 before they are eligible for the age pension.

9 While the current pension age for both men and women is 65, it has been legislated that from 1 July 2017, the qualifying age for Age Pension will increase from 65 years to 65½ years for both men and women. The qualifying age will then rise by six months every two years, reaching 67 by 1 July See table below. Date of birth Qualifying age at Commencing from 1 July 1952 to 31 December July January 1954 to 30 June July July 1955 to 31 December July 2021 From 1 January July 2023 The changes proposed in the Budget will continue the propose increase in the pension age as follows: Date of birth Qualifying age at Commencing from 1 July 1958 to 31 December July January 1960 to 30 June July July 1961 to 31 December July January 1963 to 30 June July July 1964 to 31 December July January 1966 onwards 70 1 July 2035 Whilst the policy intention is to encourage people to continue working until age 70, the reality is many people will be unable to continue working. This means there will likely be a gap between when someone retires and when they qualify for the age pension. How much additional superannuation will be required to fund this gap? A person who is currently 48 (born 1 January 1966) who wishes to retire at age 65, will require approximately $96,432 to generate the equivalent of the maximum age pension currently $21,912 p.a. (for singles) to fund the five-year gap. For members of a couple, they require approximately $72,689 each to fund the five year gap. This is a substantial amount to accumulate over the next 16 ½ years. To close this gap, a 48 year old today will need to make additional pre-tax contributions of approx. $5,232 p.a. (for singles) or $3,943 p.a. (for members of a couple) every year for the next 16 ½ years.

10 Assumptions: Figures are shown in today s dollars; rate of inflation of 3% p.a. Centrelink rates for the period between 20 March 2014 and 30 June Pensions are indexed at 3.0% p.a. An account based pension is to be commenced at age 65 with rate of return of 7% p.a. Contributions tax of 15%, rate of return on investment in accumulation phase is 6.0% p.a. net of taxes and fees. Super contributions will increase by 3.5% p.a. Note: Labor have stated they will oppose this increase in Age Pension age. Changes to the Commonwealth Seniors Health Card (CSHC) The Government has announced a number of changes to the Commonwealth Seniors Health Card (CSHC). The CSHC allows self-funded retirees to gain access to medicines listed on the Pharmaceuticals Benefits Scheme at a concessional rate as well as other concessions. To be eligible, a person must have an adjusted taxable income (ATI) of: $50,000 (singles) $80,000 (couples, combined), or $100,000 (couples, combined, for couples separated by illness or respite care) The proposed changes include: Annual indexation of the income thresholds to Consumer Price Index from September Account based pensions (ABP) that are subject to deeming will be included in the CSHC income test from 1 January Grandfathering applies to holders of a CSHC on 1 January 2015 with an ABP commenced prior to that date. Holders of the CSHC will cease to receive the Seniors Supplement beyond the June 2014 quarter. The Seniors Supplement is currently $ p.a. (singles or couples separated due to illness) or $ (couples, each). CSHC holders will still receive the Clean Energy Supplement. Resetting the asset test deeming rate thresholds 20 September 2017 The deeming thresholds will be reset to $30,000 for singles and $50,000 for couples from 20 September 2017 (for both pensioners and allowees). Current thresholds are $46,600 for singles, $77,400 for couples and $38,700 for members of allowee couples. This measure effectively increases the amount of assessable income from deemed financial investments. The proposal will impact the social security entitlements of income test affected pensioners and allowees. Additionally, older people subject to income tested residential aged care or home care fees may also be affected.

11 This measure will also impact holders of account based pensions which are impacted by the recent legislative change to deem account based pensions from 1 January 2015 Indexing pensions and pension equivalent payments by CPI 1 September 2017 The Government will index a number of pensions (and equivalent payments) by the Consumer Price Index (CPI). This measure will standardise the indexation arrangement for these payments which are currently indexed in line with the higher of the increase in the CPI, Male Total Average Weekly Earnings or the Pension and Beneficiary Living Cost Index. This measure will commence on 1 July 2014 for Parenting Payment Single recipients and from 1 September 2017 for pension payments including Age Pension, Disability Support Pension, Carer Payment, Bereavement Allowance and Veterans Affairs pensions. Removing certain concessions for Pensioners and Seniors Card Holders 1 July 2014 The Government will terminate the National Partnership Agreement on Certain Concessions for Pensioner Concession Card and Seniors Card Holders. Holders of a Pensioner Concession Card and Seniors Card currently receive a range of concessions from state and local governments such as discounts on council rates, utilities charges and public transport fares. State and local governments generally make decisions on the type and level of concessions they offer. The Australian Government, under this Agreement, has contributed funding towards selected state-based concessions. Stronger participation Incentives for job seekers under 30 1 January 2015 New applicants for Newstart Allowance (NSA) and Youth Allowance (YA) who are under 30 years of age will serve a waiting period of a maximum 6 months. Prior workforce participation will reduce the waiting period by one month for each year the person has been in paid employment. Following the waiting period, income support will be available for six months in a 12 month period, dependent on the recipient participating in Work for the Dole for at least 25 hours per week From 1 July 2015, people who are under 30 years of age who are current NSA or YA recipients will complete a period of Work for the Dole and then transition to the new criteria. If a job seeker is unable to secure employment after six months of Work for the Dole and NSA or YA, a wage subsidy may become available to an

12 employer for six months or they could elect to undertake training or study which may make them eligible for student benefits. Increasing the eligibility age for Newstart and Sickness Allowance 1 January 2015 The eligibility age for Newstart and Sickness Allowance will increase from 22 to 24 years of age. Current recipients of NSA and SA aged 22 to 24 years as at 31 December 2014 will remain on those allowances. The maximum age for Youth Allowance is increasing to 24 years of age. Young job seekers aged 22 to 24 years who become unemployed will receive Youth Allowance until they turn 25. Family Tax Benefit Reform The Treasurer has announced a number of measures which tighten the eligibility for Family Tax Benefit and put a freeze on indexation of payments. These measures and their impact are outlined below. It s important to note that for Family Tax Benefit purposes; eligibility is based on Adjusted Taxable Income (ATI). From 1 July 2014 Family Tax Benefit A & B freezing of indexation Indexation will freeze on the following rates and thresholds: o base rate and maximum rate will be fixed for two years for FTB part A o income free area will be fixed for three years for FTB part A o maintenance income free area will be fixed for three years for FTB part A o secondary earner income free area will be fixed for three years for FTB part B From 1 July 2015 Family Tax Benefit A removal of the per child add on Under this measure, a per child add-on amount will no longer be used to calculate a family s higher income-free area. The higher income-free area of $94,316 will remain, without the add-on amount of $3,796 for the second FTB child and subsequent FTB children. The impact of this measure is that the maximum income thresholds where FTB part A is no longer payable will decrease where you have more than one child.

13 - Limit the Large Family Supplement The Large Family Supplement will only be paid to families with four or more children. This change applies automatically for new and existing recipients of the supplement and will no longer be paid to families with three children from 1 July Family Tax Benefit B reduction of primary earner income limit to $100,000 The primary earner income limit for FTB part B will reduce to $100,000 from $150,000. Families with primary earner income of more than $100,000 will no longer be eligible to receive FTB part B. This change applies automatically for new and existing recipients. As part of this measure the Dependant (Invalid and Carer) Tax Offset income threshold will also reduce to $100, Family Tax Benefit B limited to families with children under 6 years Eligibility for FTB B will be limited to families whose youngest child is younger than 6 years of age from 1 July During the period between 1 July 2015 and 30 June 2017, existing recipients with a youngest child aged six years and over will not be affected until 1 July Family Tax Benefit A & B change to end of year supplements The end of year supplements will be brought back to their original amounts, which were $600 per annum per FTB part A child and $300 per annum to each FTB part B family. There will be no indexation of these amounts from 1 July New Family Tax Benefit Allowance A new allowance will be paid over 4 years to single parents on the maximum rate of FTB part A whose youngest child is aged between 6 and 12 years old from the point when they become ineligible for FTB Part B. This allowance will provide $750 for each child aged between 6 and 12 years in each eligible family. Disability Support Pension Changes - Reduced portability 1 January 2015 Disability Support Pension (DSP) recipients will only be able to receive DSP for a maximum of four weeks in a 12 month period when travelling overseas before their payment is cancelled. This proposal will apply to all DSP recipients who leave Australia from 1 January Under current legislation, DSP recipients can receive payments for up to 6 weeks for each overseas trip.

14 - Increased reviews and participation requirements for DSP recipients under 35 1 July 2014 DSP recipients under age 35 who were granted DSP between 1 January 2008 and 31 December 2011 will be reviewed against current impairment tables and have their work capacity assessed. Recipients with an assessed work capacity of 8 hours or more will be required to participate in activities that will help them find and keep a job. Compulsory activities may include: Work for the Dole job search work experience education or training connecting with a Disability Employment Service or Job Services Australia. DSP recipients who were granted on manifest grounds are excluded as they already have an assessed work capacity of less than eight hours a week. Extension of the Ordinary Waiting Period (OWP) to all working age payments 1 October 2014 The OWP is a one week waiting period that currently applies to Newstart and Sickness Allowance claimants. From 1 October 2014, the OWP will be extended to Parenting Payment (single and partnered), Widow Allowance and Youth Allowance (other). The current rule that enables the OWP to be served concurrently with other applicable waiting periods or nonpayment periods will also be removed. Freezing thresholds for Australian Government payments for three years The Government will freeze indexation of the income free area and asset test limits for a range of pensions as well as working age allowance payments, student payments and parenting payments as detailed in the following table. Three year period commences Non-pension payments Pension Payments 1 July July 2017 Affected payments include Family Tax Benefit, Child Care Benefit, Newstart Allowance, Widow Allowance, Sickness Allowance, Partner Allowance, Parenting Payment, Youth Allowance and Austudy/ABSTUDY Age Pension, Carer Payment, Disability Support Pension Bereavement Payment and Veterans Service Pension

15 Pensioner Education Supplement ceasing 1 January 2015 The Pensioner Education Supplement will no longer be available for both existing recipients and new applicants from 1 January Aged Care Workforce Supplement 1 July 2014 Funding for the Aged Care Workforce Supplement will be redirected towards a 2.4% increase in subsidies for home and residential care providers and relevant community programmes. In addition, there will be a 20% increase in the Viability Supplement to eligible residential aged care providers. Fixed Rate of Clean Energy Supplement Further indexation of the Clean Energy Supplement will cease. This will result in the payment rate for singles remaining at the 1 July 2014 rate of $13.90 per fortnight and $10.50 (each) per fortnight for couples. Housing Help for Seniors proposed in the 2013 Budget The Government will not proceed with this trial means test exemption program. It proposed that Age Pensioners who were downsizing from their family home, as long as they owned their family home for at least 25 years, could deposit at least 80 per cent of any excess sale proceeds (up to $200,000) into a special account that would be means tested exempt for up to 10 years as long as there were no withdrawals from this account. Not proceeding with the trial means test exemption for downsizing the family home A trial of a means test exemption for Age Pensioners who are downsizing their family home will not proceed. Other measures Paid parental leave to commence 1 July 2015 The government will proceed with the paid parental leave scheme from 1 July Under the scheme mothers will receive up to 26 weeks of salary up to a cap of $100,000 per annum. This translates into a maximum payment of $50,000 over the 26 week period. Women earning over $100,000 a year will receive paid parental leave but it will be capped at an equivalent of $100,000 per annum. This scheme will be funded via a 1.5% levy on companies earning taxable income over $5 million.

16 A Sustainable Higher Education Loan Programme 1 July 2016 The Government will reduce the minimum income threshold for repayment of Higher Education Loan Programme (HELP) debts from 1 July A new 2% repayment threshold will be set at 90% of the minimum 4% threshold that would otherwise have applied in (estimated to be $50,638). There will be no other change to current repayment rates. Furthermore, the annual indexation method applied to HELP debts will be changed from the Consumer Price Index to a rate equivalent to the 10 year Australian Government bond yield (capped at 6.0% p.a.) from 1 June Higher education providers able to set own tuition fees 1 January 2016 From 1 January 2016 higher education providers in Australia will be able to set their own tuition fees for the courses that they offer. This could increase or decrease the fees for some courses as these institutions compete for local and overseas students. Cessation of First Home Saver Accounts (FHSA) New FHSAs opened from 13 May 2014 will not be eligible for concessions, with the Government co-contribution to cease from 1 July 2014 and tax concessions and the income and asset test exemptions for government benefits associated with these accounts to cease from 1 July New subsidy for employers hiring Australians 50 years or over 1 July 2014 The Government will introduce a new wage subsidy, Restart, to encourage businesses to employ Australians who are aged 50 and over and have been on income support for at least six months. Employers may receive up to $10,000 over 24 months in Government assistance. Simplifying Medicare safety net arrangements 1 January 2016 A new Medicare Safety Net will apply from 1 January The new safety net thresholds are: $400 for concessional singles and concessional families, $700 for non-concessional FTB-A families and non-concessional singles, and $1,000 for non-concessional families who do not receive FTB-A. Once the annual thresholds have been met in a calendar year, Medicare will pay 80 per cent of any subsequent out-of-pocket costs, capped at 150 per cent of the Medicare Benefits Schedule (MBS) fee. The out-of-pocket

17 costs that accumulate to reaching those safety net thresholds will also be capped at 150 per cent of the MBS fee. Medicare Benefits Schedule Patient contributions for standard GP consultations and certain out-of-hospital services 1 July 2015 The Government is reducing Medicare Benefits Schedule (MBS) rebates by $5 for standard GP consultations and out-of-hospital pathology and imaging services, allowing providers of these services to collect patient contributions of $7 per service. For patients with concession cards and children under age 16, MBS rebates will only be reduced for the first 10 services each year with additional services subject to current benefit levels. Financial assistance for apprentices 1 July 2014 Tools for your Trade payments will cease and be replaced with a Trade Support Loans Programme, effective 1 July The Loans Programme provides up to $20,000 in financial assistance to apprentices over a four year apprenticeship. Trade Support Loans will be provided at concessional interest rates and capped at $8,000 in year one, $6,000 in year two, $4,000 in year three and $2,000 in year four of the apprenticeship. They will be available to apprentices undertaking a Certificate III or IV qualification that leads to an occupation on the National Skills Needs List. Apprentices will be required to commence repaying the loans when their income exceeds a minimum income repayment threshold that is consistent with those applying to university students under HELP ($53,345 in 2014/15). Apprentices who successfully complete their training will receive a 20% discount on the amount to be repaid. Fair Entitlements Guarantee (FEG) 1 July 2014 / 1 January 2015 The Fair Entitlements Guarantee (FEG) covers certain unpaid employee entitlements in the event of insolvency or bankruptcy. From 1 January 2015, the maximum payment for redundancy pay will be reduced to 16 weeks (currently 4 weeks per year of service). Employees seeking to claim an entitlement above the maximum will maintain rights as creditors to recoup any outstanding entitlement through the winding up of their employer s business. From 1 July 2014, indexation of the Maximum Weekly Wage used in calculating entitlements for claimants earning above the Maximum Weekly Wage of $2,451, will be paused until 30 June The changes will apply only to liquidations and bankruptcies that occur on or after the commencement date.

18 For more information please contact us on or Disclaimer The information contained in this Budget Briefing is based on the understanding Meridian Financial Group ABN , has of the relevant Australian laws and the 2014 Federal Budget announcements as at 13 May The Briefing should not be taken to indicate if, when or the extent to which, announcements will become law. While all care has been taken in the preparation of the Briefing (using sources believed to be reliable and accurate), no person, including Meridian Financial

19 Group, accepts responsibility for any loss suffered by any person arising from reliance on the information. The Briefing is not financial product advice and does not take into account any individual s objectives, financial situation or needs.

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