2014-15 Federal Budget review

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2014-15 Federal Budget review

5/13/2014 3:32:00 PM

The Federal Government delivered the Budget 2014-15 on the evening of Tuesday
13 May 2014.

Our tax specialists have reviewed the Budget papers and there were no major announcements relating to salary packaging or novated leasing arrangements.

However, there is one temporary change connected to the Government's proposed introduction of a Temporary Budget Repair Levy.

FBT rate to increase temporarily

Under the Temporary Budget Repair Levy, an additional 2% income tax will apply to any person with taxable income of more than $180,000 per annum.

As the Fringe Benefits Tax (FBT) rate is linked to the top marginal tax rate, it will also increase temporarily from 1 April 2015 to 31 March 2017.

What does this mean for Health and Charity employees?

In line with the FBT rate increasing, FBT gross up rates will also increase. Ordinarily a FBT rate increase would lead to a reduction in benefit payments for employees of
Charities and Public Health Institutions. However, the Government has recognised the need to protect these benefits and has committed to increasing the grossed up capping limits to ensure employee benefit payments continue without adjustment.

The table below shows the mpact on the grossed up capping limits, which will increase, and the actual benefit payments, which will remain unchanged:

                                           Current 2014/15 FBT Year Proposed 2015/16
to 2016/17 FBT years
Grossed up capping limt $17,000 $30,000 $17,667 $31,177
Actual benefit payments* $9,010 $15,900 $9,010 $15,900

* For Type 2 GST exclusive benefits

What does this mean for employees with a novated lease?

There will be no impact on novated leases using the Employee Contribution Method.
Motor vehicles on the FBT Method will see the FBT payable increase slightly.  

When will this change take effect?

This measure is subject to passage through both Houses of Federal Parliament and will not take effect until 1 April 2015.  There is no immediate action required.

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