13/05/2014 – With tonight’s release of the Federal Governments 2014-2015 Annual Budget by all accounts you could have been forgiven for trying to read between the lines, such was the build up and hype to tonight’s announcements. We think it was a very clever move from the politicians handbook of “scare the daylights out of the voters” beforehand and then deliver what could be considered almost benign blueprint for the future ahead. By all accounts it could have been a lot worse than it was.
Getting down to the nitty-gritty, so how does this years budget affect Australian expats:
- Australia Network – it has been confirmed that the government will axe the network, which will save them $196.8 million over 9 years. We wouldn’t be surprised to see either a new tendering process for the channel with Sky re-entering the picture or a online portal being delivered by the ABC to try and continue and expand upon their existing footprint. Either way expats won’t be happy with result.
- Temporary Budget Repair Levy – those Aussie expats who are still paying Australian tax will want to pay close attention to the new Levy. The Temporary Budget Repair Levy will apply at a rate of 2 per cent on individuals’ taxable income in excess of $180,000 per annum until 30 June, 2017.The Budget papers said that to prevent high income earners from utilising fringe benefits to avoid the levy, the FBT rate would be increased from 47 per cent to 49 per cent from 1 April, 2015, until 31 March, 2017, to align with the FBT income year.
- Excess superannuation contributions – The Federal Government has used the Budget to confirm its move to address long-standing issues with excess superannuation contributions, declaring that from 1 July, 2013, they will be able to be withdrawn without penalty. For any excess contributions made after 1 July, 2013, breaching the non-concessional cap, the Government will allow individuals to withdraw those excess contributions and associated earnings. This is great news for expats who have fallen victim to exceeding the concessional and non-concessional contribution caps.
- Increase in the retirement age – the government has confirmed that the requirement age will be lifted from 65 to 67 by the year 2023 and up to 70 years of age by the year 2035. This will affect all Australian expats born after 1965. If you’re about to retire shorty and were looking to use the Aged Pension to supplement your income in three years’ time, the income and threshold test will change significantly. For the purposes of the pension income test, the government will change how it deems the return from a pensioner’s financial assets, from September 2017. The government will reset the deeming thresholds from $46,600 to $30,000 for singles and from $77,400 to $50,000 for couples. However, the government will not include the family home in the means test as some people feared. There has been no announcement at this stage as to the tax free superannuation income streams for those over 60 which is great news for Aussie expats retiring soon.
- Principal Assets Test – The Government had previously announced that it would refine the principal asset test in the non-resident CGT exemption rules. One of the previous proposed amendments involved excluding inter-company dealings between entities in the same tax consolidated group in applying the ‘principal asset test’. This measure was designed to ensure that assets were not counted multiple times in applying that test. The Government has proposed an extension of this amendment to also apply to unconsolidated groups from the time the Exposure Draft legislation is released. The application of the amendment to consolidated groups is to continue to apply from 14 May 2013 (the date of the original announcement).
Whilst there were a vast number of initiatives and changes announced, the above points represent the bulk of the items that will affect Australian expats. Should there be any further changes we will release these accordingly.