The 2015 Federal Budget released on 12 May 2015 announced many measures designed to increase jobs and stimulate economic growth by supporting small businesses. There have been major changes to childcare subsidies, aged pension payments as well as tax cuts for small businesses and incentives to create more jobs and encourage spending.
With the announcement of so many changes, you may be left wondering what’s in it for you? In this update we simplify the Federal Budget and summarise how some of the major announcements may impact you.
Those impacted by the changes announced in the 2015 Federal Budget will be:
- If you’re unemployed aged under 25 you will have to wait just 4 weeks to access the dole, instead of the proposed 6 month waiting period previously announced.
- Employers will be encouraged to offer more jobs and train more unemployed young people by receiving wage subsidies of up to $7,500.
- From 1 July 2016, young people will not be eligible to apply for Newstart Allowance until age 25. This is an increase of three years.
- University graduates living overseas for more than six months and earning more than the current income threshold of $53,000pa will need to make repayments on their HECS or HELP debts from 1 July 2016.
- Foreign backpackers or those on Working Holiday Visas will no longer qualify for the $18,000 tax free threshold. Instead they will pay tax at 32.5 per cent on every dollar they earn up to $80,000.
Those Planning to Have a Baby
- After July 1, 2016 you will no longer be able to claim both the employer-funded paid parental leave scheme and the taxpayer-funded 18-week minimum wage scheme. The announcement means if an employer funded paid parental leave scheme is more generous than the Federal scheme then you will miss out on the tax-payer scheme. This will see almost 80,000 new mothers are likely to miss out on the $11,538 offered via the taxpayer-funded scheme.
Families That Choose Not to Vaccinate Their Children
- For families of the 39,000 children aged under seven in Australia that are not vaccinated, will lose all childcare subsidies and family benefits. From 1 January 2016, the ‘No Jab, No Pay’ rule will mean that these families lose all access to child care payments and Family Tax Benefit (FTB) Part A end of year supplement.
Stay At Home Parents
- Stay at home parents, whose family income is above $65,000 will lose access to childcare rebates under the Government’s plan to get more parents into work.
Families that have 4 or more children
- Families with 4 or more children will lose the Family Tax Benefit A large family supplement from 1 July 2016.
Families Using Childcare
- A new Child Care Subsidy will be introduced from 1 July 2017. This will be a single subsidy based on an ‘activity test’ and family income. The subsidy will replace the Child Care Benefit and Child Care Rebate. The amount of the subsidy payable will depend on family income and the amount of time parents spend working, training, studying or volunteering.
- The number of hours subsidised per fortnight will depend on the hours worked per fortnight as follows:
8-16 hours per fortnight will receive Childcare Subsidy of up to 36 hours per fortnight.
17-48 hours per fortnight will receive Childcare Subsidy of up to 72 hours per fortnight.
49 hours + per fortnight will receive Childcare Subsidy of up to 100 hours per fortnight.
- Families earning around $65,000 or less will receive a subsidy of 85 per cent of their child care fees (up to an hourly fee cap).
- Families with income between $65,000 and $170,000 will be about $30 a week better off from July 1, 2017.
- Childcare subsidies will be capped at $10,000 a year for those earning more than $185,000.
- There will be no annual cap for families earning less than $185,000.
- A new national support service for people adopting from overseas
Small Business Owners
- If you’re one of the 780,000 small companies in Australia with an annual turnover of less than $2,000,000 then your tax rate will be cut from 30 per cent to 28.5 per cent from 1 July 2015.
- If you are one of the 1.5 million sole traders, or you run your business as a partnership or trust with an annual turnover of less than $2 million, you will receive a tax discount of up to $1000.
- All Small businesses with turnover less than $2 million will be able to claim up to $20,000 tax deduction for every asset that they purchase. This is an immediate benefit. Small businesses will be able to claim an unlimited number of tax deductions for buying cars, machinery and other assets valued at less than $20,000 each. As long as it's not stock, businesses can claim almost any item. "If you run a cafe, you may buy new kitchen appliances, tables and chairs or if you're a tradie, it might be new tools or a computer for the home office.
- Small businesses will now be able to change ownership structure i.e. from a sole trader to a company, trust or partnership, without paying capital gains tax.
Entrepreneurs, New Business Owners and Start-Ups
- It will be easier to set up and register a new business with the introduction of a new website to support business owners in the process.
- The cost of legal and tax advice associated with starting a new business will now immediately be tax deductible.
Shift workers and those who are often unable to access government supported child care because of the unpredictable nature of their work hours
- Shift workers such as nurses, police, firefighters and ambulance officers on family incomes below $250,000 pa will be able to access subsidies for approved Nanny care from 1 January 2016 to 31 December 2017.
Remote workers / Fly in Fly Out (FIFO) workers
- Fly In Fly Out (FIFO) workers who normally reside away from the remote area that they work in will no longer be able to claim the Zone Tax Offset. For example, if you live in Perth but have a FIFO job in the Pilbara you will no longer be eligible to claim the Zone Tax Offset.
- You may face job cuts, particularly if you work in the Federal Health and Education departments which are facing $450 million cuts over the next five years.
- Farmers that are battling drought will have another year to access the Concessional Loan scheme.
- Farmers will be able to claim new fences and water storage as tax write-offs.
- New funding will be offered to boost infrastructure, extend social and community support services and soften the impact of pest animals in drought-affected areas.
The Over 50’s
- The Government will incentivise employers by giving them up to $10,000 over 12 months if they hire and keep older workers
Retirees on Age Pension
- If you’re a couple that own your own home, the maximum assets that you will be able to have, in order to qualify for a part age pension will reduce from $1.15million currently to $823,000. For a single, homeowner the reduction is from $775,000 to $550,000.
- The more stringent assets test thresholds and taper rate for pensions will apply from January 1, 2017.
- After the changes about 170,000 part-pensioners will receive an increase in their fortnightly benefit, about 236,000 wealthier pensioners will be paid less and about 91,000 will lose access to their payments.
- Those retirees that lose access to the Age Pension will automatically be entitled to the Commonwealth Seniors Health Card or Health Care Card.
- Those retirees with Defined Benefit Pensions will be able to exclude a maximum of 10% of the pension income for social security purposes from 1 July 2016. This may impact many people as the current arrangements have a large portion of the pension income excluded.
- Payments for the Age Pension, Wife Pension, Widow B and Disability Support Pension may be proportionately reduced after six weeks overseas. This is a decrease from 26 weeks currently.
Elderly Entering Aged Care
- New residents entering care from 1 July 2016, who rent out their former family home are likely to face increased care fees as the rental income received from their home will be assessable when calculating their aged care fees.
Chronically and Terminally Ill people
- Those individuals diagnosed with a terminal illness condition with a life expectancy of less than 24 months may be able to gain access to their superannuation from 1 July 2015. The measure would enable individuals that have been certified as being terminally ill by two medical specialists to gain unrestricted access to their super, tax-free.
- Changes will be made to the list of medications subsidised under the Pharmaceutical Benefits Scheme. Medicines such as paracetamol, aspirin and antacids will be removed and replaced with more common and expensive medications which are likely to reduce in cost by half.
- Anything you can download to a tablet, smartphone or e-book reader, including music; movies; e-books; digital magazines and streaming services will cost 10% more from 1 July 2017. The introduction of GST on all digital products and services is designed to make it fairer for Australian businesses competing with overseas providers.
It appears that there is something in the 2015 Federal Budget that will affect most Australians.
The budget deficit is now projected to be $35 billion compared to $17 billion in last year’s budget which means we are not likely to see a return to surplus until at least 2019-20.