2015-16 Federal Budget highlights – What it means for you
- First Pacific Financial Services
- Nov 18, 2015
- 5 min read
On Tuesday 12 May 2015 the Federal Treasurer, Joe Hockey delivered his second budget, describing it as ’measured, fair and responsible’ and one designed to promote ’jobs, growth and opportunity’. For Australian retirees, the Budget contained a number of important proposal, including:
increases in the Assets Test thresholds and the Assets Test taper rate
abandoning changes to the indexation of the Age Pension and the deeming and Income Test thresholds
removal of the former home rental income exemption for aged care residents
a higher Medicare levy low income threshold.
Age Pension
The Government proposed changes have now become law and will take effect from 1st January 2017:
The following summary contains more details about each of those changes and what they may mean to you. It is important to discuss your particular circumstances and how these changes may apply to you with your financial adviser.
Increase of the Assets Test thresholds
The Assets Test threshold describes the level of assets a retiree can have, on top of their family home, before their Age Pension entitlement is reduced under the Assets Test. The current and future thresholds are detailed below.
Assets Test threshold for full Age Pension
Currently From 1 January 2017 Increase
Single, homeowner $202,000 $250,000 $48,000
Single, non-homeowner $348,500 $450,000 $101,500
Couple, homeowner (combined) $286,500 $375,000 $88,500
Couple, non-homeowner (combined) $433,000 $575,000 $142,000
Increase the Assets Test taper rate from $1.50 to $3.00
The Assets Test taper rate is used to determine a retiree’s Age Pension entitlement under the Assets Test. Currently a person’s Age Pension entitlement under the Assets Test is reduced by $1.50 for every $1,000 of assets above the Assets Test threshold (which is being increased as described previously). The proposed measure will increase the taper rate to $3, effectively reducing the amount of assets a person can have before they are no longer entitled to a part Age Pension entitlement. A person is no longer entitled to a part Age Pension when their assets exceed the levels set out below.
Currently From 1 January 2017 Decrease
Single, homeowner $775,500 $547,000 $228,500
Single, non-homeowner $922,000 $747,000 $175,000
Couple, homeowner $1,151,500 $823,000 $328,500
Couple, non-homeowner $1,298,000 $1,023,000 $275,000
Reducing the time a person may be absent before their Age Pension benefit is reduced.
Pensioners who do not have an Australian Working Life Residence (AWLR)[1] of at least 35 years will only be paid their rate of Age Pension for six weeks while they are overseas instead of 26 weeks currently. After six weeks’ absence from Australia, pensioners who have lived in Australia for less than 35 years will be paid at a reduced rate proportional to their period of AWLR.
Pensioners overseas on the date of implementation will not be affected by this change unless they return to Australia and make a subsequent trip overseas. Pensioners with an AWLR of 35 years or more, or who are exempt from proportionality rules, such as recipients of the Disability Support Pension who are terminally ill or severely impaired and certain Widow B Pension and Wife Pension recipients, will not be affected.
The Government announced that they would no longer pursue the following measures affecting pensioners:
limiting future indexation of the maximum Age Pension to CPI only
freezing the Income Test threshold for three years
resetting deeming thresholds on the 20 September 2017 to $30,000 for single pensioners and $50,000 for pensioner couples.
Aged care
The Government has made the following Aged care changes.
Removal of the rental income exemption from 1 January 2016
Under current rules where a person moves into a residential aged care facility, rents out their former home and pays part of their aged care accommodation costs by periodic payment any rental income is excluded from the aged care means test. The proposed change will mean a new resident entering care from 1 January 2016 will have rental income counted towards their aged care means test. Consequently, they may be required to pay a higher means tested care fee.
Increasing consumer choice within Home Care from 1 February 2017
My Aged Care Gateway will become responsible for allocating home care packages directly to consumers, giving them greater choice around the services they receive and their provider.
Other important announcements
There will be increases to the Medicare levy low income thresholds for the 2014-15 financial year to help low-income taxpayers to remain exempt from paying the Medicare levy. New thresholds are:
$33,044 per annum for seniors and pensioners
$35,261 per annum for couples with no children (adding $3,238 per annum for each child)
$20,896 per annum for singles.
Early access to superannuation for people diagnosed with a terminal Illness will be allowed provided they have two medical practitioners certify that they have a life expectancy of less than 24 months instead of 12 months currently.
Various family measures to tighten family tax benefits and assist parents with child care costs:
From 1 January 2016, families will only be able to receive Family Tax Benefit (FTB) Part A for six weeks in a 12 month period while they are overseas.
From 1 July 2016, the Government will cease payment of the additional FTB Part A Large Family Supplement.
From 1 July 2016, the Government will remove the ability for individuals to take Parental Leave Pay from the Government in addition to any employer-provided parental leave entitlements.
From 1 July 2017, the Government will replace the Child Care Benefit, Child Care Rebate and the Jobs, Education and Training Child Care Fee Assistance programs with a new, single, means-tested Child Care Subsidy.
Various measures were introduced to help businesses with aggregated annual turnover of less than $2 million (small business):
From 7.30pm (AEST) 12 May 2015 and up until 30 June 2017, businesses may claim an immediate tax deduction on an eligible business asset that they start to use or install ready for use, provided it costs less than $20,000.
From 1 July 2015, reduce the small business company tax rate to 28.5% (the 30% maximum tax rate will be maintained for franking credit). For those small businesses which are not incorporated, for example sole traders, a discount of 5% of the income tax payable on business income (capped at $1,000 per individual) will be available each income year.
From 1 July 2015, businesses are eligible to claim a tax deduction for a range of professional expenses associated with starting a new business.
From 1 April 2016, relax the fringe benefit tax rules to allow small business to provide employees with more than one qualifying work-related portable electronic device.
From 1 July 2016, may change their legal structure without attracting a capital gains tax liability.
Contact us
To find out more about the information in this article contact Charles Choong on 03 9654 9886, or you can send an email to firstpacificfs@gmail.com for more information.
Important information and disclaimer
This publication has been prepared by Charles Choong (ARN 244 731) is an Authorised Representative of Professional Investment Services (ABN 11 074 608 558), Australian Financial Services Licence 234 951.
The information provided on this website has been provided as general advice only. We have not considered your financial circumstances, needs or objectives and you should seek the assistance of your Professional Investment Services Pty Ltd (PIS) Adviser before you make any decision regarding any products mentioned in this communication. Whilst all care has been taken in the preparation of this material, no warranty is given in respect of the information provided and accordingly neither PIS nor its related entities, employees or agents shall be liable on any ground whatsoever with respect to decisions or actions taken as a result of you acting upon such information.
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