The first budget for the new coalition government has as expected provided some significant changes as well as confirming changes that had been widely anticipated.   This summary will look at the following major changes grouped into three main areas – tax planning, retirement planning and government benefit planning.  The full summary can be found at our 2014 Budget - Personal Finance Summary page.

In the present political climate it is easy to get caught up in the debate over whether it is the right time for the government to be moving to a fiscal surplus.  Rather than focus on the politics of the Budget, we think it is best to focus onthe practical implications and look at how changes impact on individual financial planning strategies.

The budget has provided a number of significant changes impacting on financial planning strategies.  These have been outlined in this summary.  The major changes include:

• Deferral of higher concessional contributions cap for individuals aged 50 and over from 1 July 2012
• Higher tax on concessional contributions for very high income earners from 1 July 2012
• Mature age worker tax offset (MAWTO) to be phased out from 1 July 2012
• Increased Medicare levy low income thresholds from 1 July 2011
• Means testing of net medical expenses tax offset (NMETO) from 1 July 2012
• FTB Part A increase
• Family Tax Benefit (FTB) A eligibility from January 2013
• Supplementary Allowance
• Schoolkids Bonus
• Aged care reform from 1 July 2014
• Accelerated real estate review from 1 July 2012
• Reduced payment period of Australian Government Payments for people who are temporarily absent from Australia from 1 January 2013
• Australian residency requirements for the Age Pension from 1 January 2014
• Removal of the capital gains tax discount for non-residents
• Changes to tax rates for non-residents
• Company Loss Carry Back
• Small Business Immediate Write-Off Extension
• Previous proposals shelved
  • Reduction of the corporate tax rate to 28%. The corporate tax rate will remain at 30%.
  • Standard tax deduction of $1,000 for work-related expenses and the cost of managing tax affairs.
  • 50% discount for the first $1,000 of interest income.

The following changes announced since last year’s budget have also been confirmed

• Confirmation of changes to marginal income tax rates & thresholds
• The minimum draw down relief for superannuation pension holders will be extended next year with minimums being 75% of the original rules and returning to the normal rates from July 1 2013.
• Changes to co-contribution arrangements
• Superannuation guarantee rate to progressively rise from 9% to 12%
• Maximum age limit for the superannuation guarantee to be abolished
• Low income superannuation boost
• Allowances & supplements  to reduce the impact of the introduction of a price on carbon

Each of the above items has been addressed in a little more detail our 2012 Budget - Personal Finance Summary.

The key strategy considerations stemming from these changes include:

• Those in the workforce who are 50 or older to reconsider salary sacrifice strategies to ensure that concessional contributions in excess of $25,000 are not made and how to be prepare to make the most of increased contribution thresholds come July 2014.
• Those earning more than $300,000 of income to consider whether superannuation contributions need to be lifted to replace the extra tax payable on concessional contributions.
• Non-residents to take extra care in the disposal of assets with realisable capital gains.
• Salary sacrifice strategies to be re-assessed under the new marginal tax threshold levels and rates.
• Personal superannuation contributions in order to access the government co-contribution need to be re-assessed in light of the changed thresholds and rate.
• Those turning 70 to consider the benefits of the continued superannuation guarantee contributions.
• Continued consideration of pension payment draw downs if looking to draw only the minimum allowed.
• Small business owners to consider the timing of discretionary capital purchases.

The end of the financial year is an ideal time to consider your financial structuring for the year ahead.  However if you have not yet put plans in place for this financial year it is not too late to put them into action.  Here are some strategies to consider and as always, please seek individual financial advice before taking any action.

• Making a personal contribution of up to $1,000 into super to receive the government co-contributions.
• Making non-concessional contributions into super to get these assets into a tax friendly environment

a.     This can include an in specie transfer of assets if you use a fund that allows this

• Making a concessional contribution into super to reduce tax payable on income and get assets into a tax-friendly environment
• Making a contribution into your spouse’s super fund if they are a low income earner and by doing so receiving a tax offset whilst also getting assets into a tax friendly environment
• Bringing forward any relevant tax deductions

• Making the most of the income tax cuts
• Reductions in tax payable on interest income
• Further restrictions on the government co-contribution
• Clarity for SMSFs on instalment warrants
• The benefit to investors from a reduction in company tax rates
• Future increases to contributions going into superannuation

We have just emailed out our summary of the 2010 Budget as it relates to  personal finances and financial planning strategies.

This year's budget has provided a number of significant changes impacting on financial planning strategies.  These have been outlined in this summary.  The major changes include:

-          Confirmation of income tax changes from July 1^st 2010 increasing the effective tax free threshold from $15,000 to $16,000 for those earning $30,000 or less, the bottom of the 30% marginal tax rate threshold increasing from $35,000 to $37,000 and the current 38% marginal tax rate being reduced to 37%.

-          A 50% discount commencing July 1^st, 2011 on the tax payable on the first $1,000 of interest income generated by bank, credit union and building society accounts along with income from bonds, debentures and annuity products.

-          A $500 standard deduction for work related expenses starting 2012-13, increasing to $1,000 for 2013-14 to simplify tax returns and lead to tax savings for many individuals.

-          Superannuation guarantee contributions to rise from the current 9% to 12% by July 2019.

-          A $500 superannuation tax rebate, commencing July 1^st, 2012, of the contributions tax for those with incomes of up to $37,000.

-          The superannuation guarantee age limit to rise from 70 to 75 starting July 1^st 2013.

-          A reduction in the company tax rate from 30% to 29% in 2013-14 and 28% in 2014-15.

-          The company tax rate reductions to be brought forward for small businesses with the rate of 28% applicable from 2012-13.

-          Small businesses to be able to immediately write off asset purchases of less than $5,000 compared to the current limit of $1,000.

-          A permanent extension from 1^st July 2012 of the eligibility for those over 50 to receive $50,000 of concessional contributions into super p.a. as long as superannuation balances do not exceed $500,000.

-          The Net Medical Expenses Tax Offset to increase from $1,500 to $2,000