After spending a cosy night on the couch with a glass of wine and Mr Swan on the telly, the budget turned out to be a bit of a non event. As with most budgets most of the unpalatable stuff had already been leaked and interestingly there was none of the major vote grabbing hand outs that you would expect from a government facing an election in four months time. The fastest summary I can give from a family point of view is, baby bonus scrapped, Medicare Levy up and wave good bye to your promised tax cuts. Oh and if you are a smoker the cost of your cigarettes will increase too. So here is the low down on some of the things I think you really need to know from the Budget….
(1) Baby Bonus Scrapped
So let’s start with probably the most controversial policy change from a family point of view the scrapping of the baby bonus. Under the previous scheme, stay-at-home mothers in families with incomes of up to $150,000 received a $5000 payment on the birth or adoption of their first child and $3000 for each subsequent child. The scheme will now be changed to the much lower amounts of $2000 for the birth or adoption of a first child or each child in multiple births, and $1000 for second or subsequent children. Also, the threshold income below which you can qualify for the scheme will drop considerably to $101,000 gross income per couple from $150,000. The threshold for a second baby will be about $112,000. Under the new scheme, families will receive an initial payment of $500, with the rest to be paid in seven fortnightly instalments. The old baby bonus scheme will be scrapped from March 1st, 2014. So if you want to claim you had better get moving 🙂
(2) Minor Changes To Paid Parental Leave Means Better Access For Those Having Another Child
Under the current scheme women must work for 10 of the previous 13 months to qualify for the government’s paid parental leave. Post the Budget, parents can include time on the government-paid parental scheme as work if it occurs in the previous 13 months for a subsequent child. This move broadens the definition of the work test and means that more women will be able to access government paid parental leave when they have another baby. By the way, its handy to know that employer funded parental leave can already be included as part of the work test, where it occurs in the previous 13 months.
(3) Other Changes to Family Payments
The government will freeze the upper income test limit of $150,000 for the dependency tax offsets, Family Tax Benefit Part B, the Paid Parental Leave Scheme and Dad and Partner Pay for the next three years. Also, those of you with teenagers the government will stop paying the Family Tax Benefit Part A at the end of the calendar year in which your teenager completes school. The government are also reducing the time in which families have to claim their Family Tax Benefit entitlement or Child Care Rebate from two years to one. So it definitely pays to get on top of these things early and not wait too long or you might miss out!
(4) Kiss goodbye to your promised tax cuts
We had been promised tax cuts that were going to come into effect on the July 1 2015 but these are now no longer going to happen. My understanding is they were to help out with the increase in costs associated with the Carbon Tax. Supposedly the tax cuts have been deferred but that is most likely political speak for “never going to happen”.
(5) Medicare Levy increased from 1.5% to 2%
From July 1 2014 it is proposed that the Medicare levy increase from 1.5% to 2% to fund DisabilityCare, the Government’s national disability insurance scheme. It is estimated that, on an income of $50,000 per year this increase will be an extra $250 in levy, on $75,000 it works out to be an extra $375 and on $100,000 per annum the increase adds an extra $500 to your Medicare Levy. No doubt most will agree that the increase in the levy is going to an area in desperate need of funding and long over looked by both sides of the political spectrum.
Of course, there were many more things announced but I think the ones outlined above are some of the most important for Australian families. As we are facing an election later this year, all of these changes are only proposed and if the coalition gain power it is highly likely that some of these measures will be changed. I will keep you informed!
* Please note this is for your general information only and does not constitute financial advice.