RemServ's tax specialists reviews the 2013/ 14 budget
5/15/2013 2:56:00 PM
The Federal Government delivered the 2013-14 Budget on Tuesday 14 May.
Our tax specialists have reviewed the Budget papers to provide an overview of proposed changes which may affect salary packaging arrangements for employees.
Watch our budget review video
1. Increase to the Medicare levy
The Federal Government has proposed to increase the Medicare levy from 1.5% to 2.0% in order to fund the National Disability Insurance Scheme (NDIS).
Given the Fringe Benefits Tax (FBT) rate is set at the highest marginal tax rate plus the Medicare levy, this will increase the FBT rate and change gross-up factors for FBT calculation purposes.
These changes are proposed to come into effect in 2014 and are subject to the successful passage of the legislation through the Parliament. In summary:
- the Medicare levy will increase from 1.5% to 2.0%, from 1 July 2014
- the FBT rate will increase from 46.5% to 47%, from 1 April 2014
- Type 1 gross-up factor (GST benefits) increases from 2.0647 to 2.080, from 1 April 2014
- Type 2 gross-up factor (non-GST benefits) increases from 1.8692 to 1.886, from 1 April 2014
What does this change mean for employees?
The net impact for health and not-for-profit employees is negligible, with a net annual reduction in the tax benefit of between $27 and $49.
For employees with a novated lease, initial modelling indicates an increase in the net annual benefit of approximately $37.
2. Changes to self education expenses
Prior to the Federal Budget, the Government announced changes to the amount that can be claimed as an income tax deduction for work-related self education expenses. Previously there was no limit to the amount that could be claimed as an income tax deduction.
From 1 July 2014, the income tax deduction limit will be capped at $2,000. This in turn affects the amount that can be salary packaged as work-related self education, which also will be capped at $2,000.
However, it should be noted that prior to the legislation being enacted, the Government plans to undertake consultation on this measure following the release of a Discussion Paper for comment in late May 2013.
3. Superannuation changes
Excess superannuation contributions
On 5 April 2013, the Government announced a change to the tax applied to excess superannuation contributions.
From 1 July 2013, excess superannuation contributions will be taxed at the employee's personal marginal rate of tax, plus an interest charge. This is a departure from the current situation where the tax applied is set at the highest marginal tax rate.
Changes to concessional superannuation contributions
The current cap for concessional superannuation contributions is set at $25,000 per person, regardless of their age. On 5 April 2013, the Government's announcement provided for an increase from 1 July 2013 in the concessional contribution limit to $35,000 for individuals over the age of 60 years.
The same limit will apply for individuals over the age of 50 years from 1 July 2014. The Government expects that the $35,000 limit will be extended to all individuals by 1 July 2018.
For not-for-profit organisations
Please note, there were no changes relating to FBT concessions for the not-for-profit (NFP) sector.
We will continue to monitor the work of the NFP Sector Tax Concession Working Group and keep our not-for-profit employers informed of any developments should they arise.