2014 Federal Budget: Past Budgets Start to Bite!

2014 Federal Budget: Past Budgets Start to Bite!

Australians doing tax analysis

2014 Federal Budget: Past Budgets Start to Bite!

To understand the 2014 Federal Budget you need to remember some changes that happened in previous budgets. The trend is this: apart from Medicare, the government is withdrawing support for health costs and it wants you to retire with enough money to not need the Age Pension but not too much because of the tax free environment superannuation provides. The $7 fee to visit a doctor is insignificant for most given much greater health care costs which many are forgetting. Many don’t realise the following costs are happening in just few short years, which were all announced in prior year Budgets:

  • Medical expenses tax offset – this is being phased out and in practical terms the last time most could have accessed this was for the 2013 year of income;

  • Private health insurance rebates – this are being phased out, depending upon your income, and will reduce in value over time with the rebates only increasing by CPI and not the higher rate of premium increases;

  • Medicare levy – the standard Medicare levy, for so many years at 1.5%, to jump to 2.0% from 1 July 2014.

Put together, there are many hundreds and often thousands of dollars of lost benefit to middle and high income taxpayers from these changes, and none of these were part of the 13 May 2014 budget announcements.

The higher 9.5% superannuation guarantee won’t be enough for many to accumulate a sufficient nest egg and smart salary packaging over the long term, during your working life, will be crucial.  The caps are increasing from 1 July 2014 and it will be smart to start doing some calculations and salary packaging adjustments now, because the government may limit just how much you can push into superannuation when it suits you later.

If superannuation just doesn’t interest you, that’s fine but don’t complain when you are 75 years old, retired and still needing to lodge tax returns and pay vast amounts of tax on the earnings from your $2 million accumulated investments whilst your neighbour has the same investments tax free in superannuation and enjoying finer things in life than you.

2014 Federal Budget: Won’t Work for $7

2014 Federal Budget: Won’t Work for $7

2014 Federal Budget: Negative Gearing Back in Vogue

2014 Federal Budget: Negative Gearing Back in Vogue