The new Coalition Government is reining in the spending.  One would say that this budget is more a focus on investment and less on consumption by the government. 

Highlights of Budget 2014

     BUSINESS TAXATION
  • FBT Rate to go to 49% for the period 1 April 2015 until 31 March 2017, to prevent high income earners from utilising fringe benefits to avoid the new 2%  Temporary Budget Repair Levy announced.
  • Still in limbo is the SME Instant Asset Write Off for assets over $6500 threshold which would have had an effective date of 1 January  2014 cut off
  • Reduction in the R&D Offset Rates Effective from 1 July 2014 the rates of the refundable and non-refundable R&D tax offset will be reduced by 1.5%.  This means that the refundable offset will be reduced to 43.5% from 45% and the non-refundable offset will be reduced to 38.5%.  The end result of this reduction is not as bad as first thought, as it also comes with the proposed company tax rate reduction of 1.5% from 1 July 2015, so the impact will be on the 2014/15 tax year claim only.
  • Reform of Employee Shares Scheme tax rules put on hold, the budget was silent on this leaving startups and SME with the current expensive and unattractive Employee Share Scheme regime
  • New Schedule for increasing the Superannuation Guarantee (SG)
    • SG rate of 9.25% will increase to 9.5% from 1 July 2014 
    • SG will remain at 9.25% until 30 June 2018 and then increase by 0.5% each year until it reaches 12% in 2022/23?


   STARTUPS, ENTREPRENEURS & EXPANDING BUSINESS - GOVERNMENT GRANT PROGRAMS

  • Axing of the following programs from 1 January 2015 
    • Innovation Investment Fund 
    • Commercialisation Australia,
    • Enterprise Solutions
    • Industry Innovation Councils
    • Enterprise Connect
    • Industry Innovation Precincts
    • Textile, Clothing and Footwear Small Business and Building Capability

    These changes are expected to save $846.6 million over the five years.

  • The axing of the above will be replaced by a Single Entrepreneurs Infrastructure Fund which the government has budgeted to cost $484.22 million over the same period. The details on this are still light and are expected to be announced in the coming week
  • The Export Market Development Grant remains getting an extra $50 million boast as announced in December 2013, which is good news as rumours before Budget was that this was also on its way out?
    PERSONAL 
  • New Budget deficit levy (tax) of 2% to apply for 3 years starting 1 July 2014 for those with incomes over $180,000
  • Medicare levy for all increases to 2% from 1 July 2014 from current 1.5%
  • The Medicare Levy Surcharge and private health insurance offset threshold to be frozen for 3 years from 1 July 2015
  • Family Tax Benefits (FTB) 2 year freeze on rates
  • Family Tax Benefit Part B, eligibility changes - cut off will be $100,000 (primary earner) from the current rate of $150,000
  • Family Tax Benefit B will be limited to families whose youngest child is younger than 6 years of age from 1 July 2015
  • New Family Tax Benefit for Single parents , who qualify for FTB (A) and ineligible for FTB (B), allowance will provide %750 for each child aged between 6 and 12 years from 1 July 2015
  • Removal of FTB Part A per Child
  • Going are the Tax Offsets for Dependent Spouse & Mature Age Workers Offset  from 1 July 2014
  • Pension age to increase to 70 by 2035 
  • HELP repayment thresholds from 2016/17 estimated to be $50,638 with a repayment rate of 2%
  • HELP to continue and to be expanded to Students completing Vocational Education and Training, from July 22014 those learning a trade will also be able to apply for loans of upto $20,000 over a four year apprenticeship
  • New Paid Parental Leave comes into effect 1 July 2015, but will be capped at $50,000 (based on salary of $100,000) as new  Paid Parental Leave will be for 26  weeks from current 13 weeks


Overall this budget contained very few measurer that advance Real Tax reform, it appears that current and past governments are just keen on undertaking reviews but doing very little on the recommendations.  It will also be of interest in the coming months to see how the states react to the cuts, will we see a push to increase GST, more then likely yes.

Should you have any concerns or wish to discuss how this years budget affects you, please contact us success@akagroup.com.au