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Budget 2015: What's in it for families and individuals?

May 2015

The Prime Minister calls the "families package" the centrepiece of the upcoming budget with child care facing "significant changes."  

As the Government approaches its second Federal Budget, there are few doubts that Australian families will be holding their breath about that impact it will have on the household budget. Many of the reforms included in the 2014/15 Budget have yet to come to fruition thanks to a challenging Senate.

So as we approach May 12, what is likely to be included in Budget 2015/16 that will impact families and individuals?

Families

The Prime Minister calls the "families package" the centrepiece of the upcoming budget with child care facing "significant changes."  

While the Government has stated that this will be a better deal it is likely to be a reformulation of how child care support applies.  If the budget measures follow the Productivity Commission's recent recommendations the Government will introduce a single means tested and activity based system.

The Minister for Social Services, Scott Morrison also recently released details of an in-home nanny program to support shift workers.  The two year trial will support home care for children of shift workers, such as nurses and police, etc.

Changes to how super is taxed

Paving the way for the Government to change how superannuation is taxed, Australia's leading body for the superannuation industry, the SMSF Association, recently stated that, "The tax treatment of very high account balances should be the starting point for discussions around adjustments to superannuation tax concessions, rather than blanket changes that impact on all members."  

Their analysis of very high superannuation account balances found that 24,000 SMSF members in the pension phase with balances in excess of $2m received around $5.2bn in tax-free income stream payments, or an average of around $216,000. 

The Labor Party also recently supported changes to how super is taxed recommending that earnings of more than $75,000 during the retirement phase are taxed at a concessional rate of 15% instead of being tax-free.  And, the recent Tax Discussion Paper also stated that the Government should equalise the way savings and investments are taxed including superannuation.  

In effect, the Government has the support of the leading professional body and the Labor party to change the way superannuation is taxed, particularly if change is targeted at high-income earners.

From a policy perspective, it's hard to argue that high-income earners should access tax concessions on superannuation beyond the need to have certainty about superannuation policy.  If the way super is taxed is not altered in this budget, it's highly likely it will be reformed in the near future – most likely as part of the Government's response to the Tax Discussion Paper.

Pensions

With the baby boomer generation beginning to enter their retirement years, the Government is struggling to meet the $42 billion price tag of providing full and part pensions. 

Like superannuation, the Government appears open to change that targets the asset rich.  Currently, couples with a family home and assets up to $1.15m qualify for a part pension. In recent months, there have been calls to include the family home as part of the asset test to qualify for a pension or part-pension.

Other recommendations from the Australian Council of Social Services (ACOSS) have recommended a reduction in the assets test for home owners and an increase in the taper rate, effectively reducing the pension amount available once the threshold is passed. 

Meanwhile, the Centre for Independent Studies has suggested that the family home be part of the equation, using it to fund a "default national reverse mortgage scheme", with the income counted as part of the assets test. 

At this point, it's a matter of "watch this space". Including the family home would signify a big shift, because as financial presenter Alan Kohler points out: "the system has always been that when you retire you live on the pension and/or savings and when you die the kids get the house." 


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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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