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Budget Changes that apply from 1 July 2014

June 2014

There has been much debate about which Federal Budget measures will and won't make it through the Senate process, however there are several measures that start from 1 July.  

Individuals
  • Temporary Budget Repair Levy. Adds 2% to the tax rate for every dollar of a taxpayer's annual taxable income over $180,000
  • Increase in the Medicare Levy from 1.5% to 2%
  • Superannuation Guarantee charge increases from 9.25% to 9.5%.
  • Aged care reforms introduce new assets tests for resident's accommodation and care fees
Business

R&D incentive reduced
In the 2014/2015 Federal Budget, the Government announced that the Research & Development Tax Incentive will be reduced by 1.5% from 1 July 2014.  This means the refundable offset will be reduced to 43.5% while the non-refundable offset will be reduced to 38.5%. 
 
While it is uncertain whether the legislation enacting this change will pass the current Parliament, businesses undertaking R&D activities this year may want to consider bringing forward expenditure to maximise their claim

Living away from home allowance (LAFHA) transitional period ends 
The LAFHA transitional period ends on 30 June 2014. Now, the main condition to be satisfied is that the employee must have a normal place of residence in Australia that is maintained for their "personal use and enjoyment" while they are living and working in another location. 

This means that the employee cannot rent out their usual residence while they are away.  In most cases, LAFHAs will also be time limited to 12 months.  So, employers can still pay a concessionally taxed LAFHA for another 12 months from 1 July 2014.  

If the employee is working on a fly-in- fly-out or drive-in drive-out basis the LAFHA is not subject to the 12 month limit.

SMSFs

New SMSF trustee penalties
From 1 July 2014 the ATO has greater powers to enforce the superannuation rules by levying financial penalties directly on trustees.

Concessional contribution cap changes
From 1 July 2014, the concessional contribution cap for taxpayers up to the age of 50 is $30,000. And for those 50 and above, the cap is $35,000.

Non-concessional cap changes
The non-concessional contributions cap from 1 July 2014 is $180,000 (up from $150,000) or $540,000 over 3 years.

Insurance inside an SMSF
From 1 July 2014, new insurance policies within a SMSF must be consistent with the death, terminal illness, and permanent and temporary incapacity conditions of release in the Superannuation Industry (Supervision) Act.

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Last updated June 2014. This article is provided for information purposes only and should not be used in place of advice from your accountant. Please contact us on 02 9957 4033 to discuss your specific circumstances.

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Disclaimer

This article is provided for information purposes only and correct at the time of publication. It should not be used in place of advice from your accountant. Please contact us on 02 9957 4033 to discuss your specific circumstances.

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