Keeping up with regulatory change
12 Dec 2014
By Shadforth Financial Group
More than six months has now passed since the May Federal Budget. The Coalition Government's budget reforms are moving slowly ahead, albeit with a number of compromises and modifications. Many changes are still outstanding while some reforms have been abandoned altogether as they had no chance of getting through the Senate.
Keeping track of these changes and anticipating the next move the Government will make can be a challenge. Below we look at some of the key reforms and their status.
Super Guarantee (SG) rate frozen at 9.5% until 1 July 2021
The Government has pushed out the date from when the SG rate would begin to increase from 9.5% from 1 July 2018 to 1 July 2021. Starting 1 July 2021 the SG rate will increase by 0.5% each year until it reaches 12% from 1 July 2025.
Mature Age Worker Tax Offset to be abolished from 1 July 2014
A bill has been introduced to abolish the Mature Age Workers Tax Offset starting from financial year 2014/15. This tax offset is for those born before 1 July 1957 (aged 57 and over) and who are earning under $63,000pa. The maximum $500 offset applies to incomes under $53,000pa and phases out between $53,000pa and $63,000pa. The Government intends to replace the tax offset with 'Restart' - a $10,000 subsidy for employers to employ older workers. This Bill is currently in the Senate for review.
New Account-Based Pensions to be subject to deeming under Centrelink's income test from 1 January 2015
From 1 January 2015, Account–Based Pensions will be subject to deeming under the Centrelink income test for social security purposes.
Currently Account-Based Pensions are treated generously under the income test with income from the actual pension, less a generous deductible amount, being counted as income. From 1 January 2015, the pension balance of an Account-Based Pension will be treated just like any other financial asset and assumed to produce a particular level of income. The pension balance will be 'deemed' to earn income at a rate of 2%pa on the first $48,000pa for singles and $79,600pa for couples, and 3.5% for amounts over these thresholds.
Existing pensions payable to individuals receiving Centrelink income support on or before 31 December 2015 are 'grandfathered' from these changes and will continue to be assessed under the current income test rules.
Anyone who thinks they may be affected by the introduction of deeming on income streams should contact their financial adviser as soon as possible.
Deeming of pensions extends to the Commonwealth Seniors Health Card (CSHC)
from 1 January 2015 The CSHC provides valuable discounts on pharmaceuticals and other health benefits. It is available to those of age pension age (currently age 65 or 60 for veterans) who don't receive the age pension and whose adjusted taxable income is less than $51,500pa ($82,400pa for couples). As Account-Based Pension income is tax-free, it has been exempt from adjusted taxable income (ATI). From 1 January 2015 deemed income from Account-Based Pensions will be counted in ATI.
Current pensions payable to current card holders will be grandfathered from the changes.
Government support reforms
The following is a summary of key changes to Government support payments that have recently been passed: These include:
- Freezing the assets test threshold for two years from 1 July 2015 for allowances, student payments and parenting payments; and for three years from 1 July 2017 for all pensions (other than parenting payment single). This also applies to veterans' entitlements and farm household support.
- Relocation assistance to students from 1 January 2015 will be limited to relocating to or from regional or remote areas, and no longer extends to relocation between major cities.
- Changes to the overseas portability of some benefits from 1 January 2015:
- For disability pensions, the six week allowable period will reduce to 28 days in a 12 month period.
- For student payments, the six week allowable period is restricted to absences for medical treatment or family reasons.
- For the CSHC holders, the six week period will increase to 19 weeks.
- Applying revised disability impairment tables and program support requirements to disability support pensioners under age 35.
- Changes to the Family Tax Benefit (FTB) from 1 July 2015:
- The income limit for primary earner for FTB Part B will reduce from $150,000pa to $100,000pa.
- The large family supplement for FTB Part A will be restricted to families with four or more children.
- The income uplift for additional children under the FTB Part A base rate income test will be removed.
- Remove indexation of the Clean Energy Supplement (now called the Energy Supplement).
With additional changes likely as the Government seeks ways to make additional savings it is likely there will be more changes on the horizon. If you have any questions regarding how the current legislative reforms may impact you simply give your team at Shadforth a call.