3.1 New schedule for increasing the Superannuation Guarantee (‘SG’)
The government will change the schedules for increasing the SG rate from 9.25% rate to 12%, to provide business with certainty, as follows:
• Instead of pausing the SG rate at 9.25% (as previously announced0, the SG rate will increase from 9.25% to 9.5% from 1 July 2014 as currently legislated, to give certainty to employers and employees (given the Minerals Resource Rent Tax Repeal and Other Measures Bill 2013 was rejected in the Senate).
• The SG rate will reman at 9.5% until 30 June 2018 and then increase by 0.5% each year until it reaches 12% in 2022/23 (one year later than previously proposed).
3.2 Private Health Insurance Rebate and Medicare Levy Surcharge income thresholds – pausing indexation
The PHI rebate is currently income tested against three income tiers with were first introduced on 1 July 2012. The rebate may be available to those eligible individuals who are covered by a complying private health insurance policy.
The MLS is levied upon individual taxpayers who are not covered by a complying private health insurance policy, and whose income exceeds certain income thresholds.
From 1 July 2015 to 30 June 2018, the PHI and MLS income thresholds will not be indexed. In relation to the PHI rebate (for example), this means that if an individual’s income or a family’s income increase enough for them to move into a higher income tier, they may end up receiving a lower or no PHI rebate.
3.3 Higher Education Loan Programme – cessation of HECS – HELP benefit and changes to repayment thresholds and indexation
The government will continue to make HELP loans so that eligible students do not have to pay their fee up-front. However, the HECS-HELP benefit that was intended to provide an incentive for graduates of particular courses to take up related occupations or work in specified locations will be abolished from 2015/16.
Further, commencing from 2016/17, a new minimum threshold will be established for the repayment of HELP debts, currently estimated to be $50,638. A new repayment rate of 2% of repayment income will also be applied to debtors with incomes above the new minimum threshold. Indexation of HELP debts will also be adjusted from 1 July 2016.
3.5 Research and Development Tax Incentive – reducing the rates of the refundable and non-refundable tax offsets
Consistent with the government’s commitment to cut the company tax rate from 1 July 2015, the government will preserve the relative value of the Research and Development Tax Incentive by reducing the rates of the refundable and non-refundable offsets by 1.5%, effective from 1 July 2014.
3.7 Measures for a more sustainable family payments system
The government has announced various measures to the existing family payments system. Some of the main measures including the following:
(1) new supplement for single parents – From 1 July 2015, single parents who receive teh maximum rate of FTB Part A, but are no longer receiving FTB Part B as a result of changes to eligibility, will have access to a new $750 annual supplement for each child aged 6-12 years.
(2) FTB Part B for children under 6 years of age – From 1 July 2015, families eligible for FTB Part B will only receive the payment while their youngest child is under 6 years of age. Families already receiving FTB Part B with a youngest child at least 6 years of age on 1 July 2015 will continue to receive FTB Part B until 30 June 2017.
(3) FTB Part B primary earner income limit – From 1 July 2015, the primary earner income limit for families to become eligible for FTB Part B will be reduced from $150,000 to $100,000 per annum.
(4) FTB end-of-year supplements – From 1 July 2015, the FTB Parts A and B end-of-year supplements will be returned to their original amounts of $600 and $300, and will remain at the amount without further indexation.
(5) FTB Part A higher-income free area per child add-on – From 1 July 2015, the FTB Part A per child add-on amount used to calculate a family’s income free area will no longer apply.
(6) Paid Parental Leave – From 1 July 2015, the Abbott government will reform the Paid Parental Leave scheme, to provide six month paid leave (with an income cap of $100,000 per annum) and include superannuation. The intention is to support women to remain engaged with their employers, and help boost their retirement income.
3.9 Increasing the age pension age to 70 years of age
Building on the former government’s move to increase the pension age to 67 by 1 July 2023, new legislation will continue this process to increase the age pension age from 1 July 2025, until it reaches the age of 70 in July 2035. This measure will not affect Australian born before 1 July 1958.
From September 2017, the government will also reset the deeming thresholds for the income test to $30,000 for single pensioners and $50,000 for pensioner couples combined . Furthermore, for a period of three years from July 2017, the Government will pause the indexation of the income and assets test free areas for the pension (i.e., the amount of income and assets that individuals and couples can have before the pension begins to be reduced).