2013/14 Federal Budget: Video blog

This week Treasurer Wayne Swan delivered the 2013/14 Federal Budget in Canberra, and as always, here’s our annual post-budget review with Senior Tax Adviser Simon Ellis!

 

Additional Changes

In addition to the changes outlined in the above video it is worth noting that the 0.5% increase in the effective tax rate for all employees – i.e. the increase in the Medicare levy – will actually slightly increase the after-tax savings achieved through salary packaging.  For every $1,000 in benefit costs an employee salary packages (i.e. pays for with pre-tax salary) they will now save an additional $5.

As well as this the budget announced that the FBT rate will increase to 47% from 1 April 2014 and this will mean the FBT-gross up rates also change from that date as follows:

  • Type 1: moves from 2.0647 to 2.0802
  • Type 2: moves from 1.8692 to 1.8868

As a result of these changes employees in the not-for-profit and public hospital sectors will see a small reduction in their threshold (or “cap”) benefit as follows:

  • The annual amount a Public Hospital employee is able to package under this benefit will decrease from $9,095 to $9,010, and
  • The annual amount a PBI employee is able to package under this benefit will decrease from $16,050 to $15,900

The impact of the reduced limit will, however, be largely offset by the increase in salary packaging savings flowing from the higher Medicare rate

Timeframes

Employers and employees should note the following timetable for implementation of the salary packaging changes noted in this post:

Changes applying from 1 July 2013
  • Increase of the superannuation concessional cap to $35,000 p.a. for individuals aged 60 and over
  • Increase in the Superannuation Guarantee rate from 9% to 9.25%
Changes applying from 1 April 2014
  • Transition period for novated lease benefits ends: all salary packaging employees move to the flat 20% statutory rate (i.e. no more km travel)
  • Transition period for in-house fringe benefits ends: no more packaging of this benefit can occur
  • New FBT rate of 47% applies and threshold limits for NFP employers change
Changes applying from 1 July 2014
  • Increase of the superannuation concessional cap to $35,000 p.a. for individuals aged 50 and over
  • Cap of $2,000 will be applied to salary packaging of self-education expenses
  • Increase in the personal medicare levy from 1.5% to 2%.

Deven Billimoria
Chief Executive Officer
Smartgroup

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