Key changes for 2015 and beyond 10 December 2014 Mansi Desai outlines recent technical changes and what s in store for 2015 and beyond. Superannuation Superannuation Guarantee Superannuation Guarantee (SG) contributions have been frozen at 9.5% until 30 June 2021 and will now reach 12% on 1 July 2025 as shown below: From SG Rate 1 July 2014 to 9.5% 30 June 2021 1 July 2021 10% 1 July 2022 10.5% 1 July 2023 11% 1 July 2024 11.5% 1 July 2025 12% Low income superannuation contribution It was originally proposed to abolish the low income superannuation contribution (LISC) from the 2012/13 financial year. However, this has been deferred and will be abolished from 1 July 2017. Refund of excess NCCs Legislation was introduced into the Parliament on 4 December 2014 to support the announcement to allow the refund of excess non-concessional contributions (NCCs). The provisions include associated earnings to also be refunded which are taxed at the client s marginal tax rate. Table of contents Superannuation... 1 Superannuation Guarantee... 1 Low income superannuation contribution. 1 Refund of excess NCCs... 1 Reporting super on payslips... 1 SMSFs and employer contributions... 2 Taxation... 2 FBT rate increase... 2 Private Health Insurance Rebate and Medicare Levy Surcharge... 2 CSHC Card... 2 Government income support payments.2 Deeming of income streams... 2 Child Care Rebate and Benefit... 2 Assets Test thresholds... 3 Income Test thresholds... 3 Increase in age pension age... 3 Indexation of pensions... 3 Family Tax Benefits... 3 Portability changes... 3 Other measures... 3 First Home Saver Accounts... 3 At the time of writing this article, legislation had not passed, but the measure is proposed to commence from the 2013/14 financial year. Our article Refund of excess NCCs on mlc.com.au in the secure adviser section provides more details. Reporting super on payslips It is proposed to repeal the reporting of superannuation contributions on payslips from the date of Royal Assent. 1
SMSFs and employer contributions All employers are required to make super contributions electronically for employees from: 1 July 2014, where there are 20 or more employees, and 1 July 2015,where there are 19 or fewer employees, or earlier if they choose to. All super funds, including SMSFs, will need to ensure they will be able to receive these contributions electronically. In each case the ATO will allow employers 12 months to transition to electronic transfers. The provisions do not apply to SMSFs where the only employer contributions are related party contributions. Taxation FBT rate increase In line with the introduction of the Temporary Budget Repair Levy, the Fringe Benefits Tax (FBT) rate will increase by 2% to 49% for two FBT years from 1 April 2015. While the levy on taxable incomes only applies to higher income earners, the FBT rate increase will impact a wide range of taxpayers, as it applies to all taxable fringe benefits, except those that are exempt. Private Health Insurance Rebate and Medicare Levy Surcharge The income thresholds determining the Private Health Insurance Rebate and Medicare Levy Surcharge will not be indexed for three years, starting on 1 July 2015. During this period, an increasing number of clients will be pushed through these thresholds as their incomes rise. This will result in a lower rebate or higher surcharge amount. CSHC card A range of changes have been made to the Commonwealth Seniors Health Care (CSHC) Card. Starting 20 September 2014, the income thresholds are indexed to CPI on an annual basis. The thresholds are now: Family situation ATI Single $51,500 Couples (combined) $82,400 Separated couples (combined) 1 $103,000 The definition of income for the CSHC will be expanded. From 1 January 2015, an amount will be included in the income test based on an account based pension being subject to deeming. Grandfathering provisions apply to those people who have commenced their account based pension and hold the CSHC prior to 1 January 2015. The client must also be continuously entitled to the card from 1 January 2015. The portability period has been extended from six weeks to 19 weeks from 1 January 2015. For further details on these changes refer to our article Commonwealth Seniors Health Care Card changes on mlc.com.au in the secure adviser section. Government income support payments A raft of changes have been made to Government income support payments. The most significant changes for financial planning are outlined below. Deeming of income streams The deeming rules will be extended to account based pensions and grandfathering provisions will exist for clients who: commence the income stream before 1 January 2015, and are receiving an income support payment immediately before 1 January 2015. This allows the income treatment to be the gross pension payment less the deduction amount. One requirement to retain the grandfathering is the client must continuously be entitled to an income support payment from 1 January 2015. A more detailed explanation of the rules is in our article Income stream deeming from 1 January 2015. Child Care Rebate and Benefit The maximum Child Care Rebate has been frozen at $7,500 pa and the Child Care Benefit income thresholds will remain at the amounts applicable on 30 June 2014. Both these measures will remain in place for three financial years from 1 July 2014 to 1 July 2017. 1 Includes couples separated by illness or respite or where one partner is in prison. 2
Assets Test thresholds Indexation of the lower assets test thresholds will be paused for: two years for all working age allowances, student payments and parenting payment (single) from 1 July 2015, and three years for all pensions from 1 July 2017. Income Test thresholds From 1 July 2017 the current income test free area for all pensions (excluding single parenting payment) and deeming thresholds (all payments) would be frozen for three years, and the deeming thresholds would be reset to: Family situation Threshold Single $30,000 Couples (combined) $50,000 Increase in age pension age The qualifying age for the age pension will increase from 67 to 70 starting from 1 July 2025. Currently the legislation provides for a gradual increase of age pension age from 65 to 67. This measure will further increase the age pension age. Indexation of pensions All pensions (excluding parenting payment) are to be indexed to CPI from 20 September 2017. Family Tax Benefits There are a number of proposed changes for Family Tax Benefits (FTB) across separate Bills. Measures that have passed and apply from 1 July 2015 include: the FTB B income limit for primary income earners will reduce from $150,000 to $100,000 pa the FTB A large supplement will be limited to families with four or more children, and the FTB A per child add-on to the higher income free area will be removed for each additional child after the first child. Measures with legislation before Parliament that are proposed to commence from 1 July 2015 include: The standard maximum and base rate for FTB A and B will be maintained for two years The FTB end-of-year supplements will be revised to the original values and indexation will cease FTB B will be limited to families with children under six years. Transitional arrangements will apply, allowing families who were entitled to FTB B for a youngest child aged six years or more on 30 June 2015 to remain eligible for FTB B for up to two years until 30 June 2017. This supplement aims to offset partially the loss of assistance experienced by certain single parent families, as a result of the reduction, to under age six, of the age limit for FTB B from 1 July 2015, with transitional arrangements for two years. Only FTB children aged six to 12 would attract the additional payment, and families, while covered by the FTB B age limit transitional provision, would not be eligible for the payment. The current levels of FTB free areas will be maintained for three years. Portability changes From 1 January 2015, portability will be limited to: 28 days in a 12 month period for Disability Support Pension recipients, and six week overseas for student payments. Other measures First Home Saver Accounts Status: Announcement only It is proposed to abolish the First Home Saver Accounts. Changes include: new accounts from Budget night (13 May 2014) are to be ineligible for concessions or Government contributions eligibility for Government contributions are to cease from 1 July 2014 tax and social security test exemptions are to cease from 1 July 2015, and restrictions on withdrawals are to be removed from 1 July 2015. No legislation has been introduced to support these measures. 3
Contact details For further information, please contact MLC Technical Services on 1800 645 597. Important information This document was prepared by MLC Limited ABN 90 000 000 402 (AFSL number 230694) without taking into account any particular person s objectives, financial situation or needs. It is solely for use of financial advisers and it is not intended for distribution to investors. It is not guaranteed as accurate or complete and should not be relied upon as such. MLC Limited does not accept any responsibility for the opinions, comments and analysis contained in this document, all of which are intended to be of a general nature. Accordingly, reliance should not be placed by anyone on this document as the basis for making any investment, financial or other decision. Investors should, before acting on this information, consider the appropriateness of this information having regard to their personal objectives, financial situation or needs. We recommend investors obtain financial advice specific to their situation before making any financial, investment or insurance decision. MLC Limited, 105-153 Miller Street, North Sydney, NSW 2060, is a member of the National Australian Group of companies. 4
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