2014 Federal Budget - Where Are We Now?

08.09.14

The 2014/15 Federal Budget handed down a number of months ago received a mixed reaction amongst commentators and was less popular with sections of the voting public. 

The government has had very public challenges in enacting the various changes due to the split of power in the various Houses.  Given this an update of the status of the main measures is outlined below:

• Temporary budget repair levy – this has been enacted and runs for 3 years from 1 July 2014 on individuals income in excess of $180,000 or at a rate of 2%;

• Fuel Excise indexation – the biannual indexation of fuel has been re-enlivened with the law being enacted and having application from 1 August 2014;

• Medicare levy low income thresholds - this has been enacted increasing the threshold for couples of $34,367;

• The change in the R&D tax offset reduction of 1.5% was introduced into the House of Representatives from 4September 2014.  This change was scheduled to have application from 1 July 2014, even though the change in tax rate was to apply from the following year (see below).

• The change in company tax rate and associated parental leave charge have yet to be legislated, however, they are still scheduled for application from 1 July 2015; and

• The thin capitalisation changes announced pre budget has been legislated, however, it has not passed the Houses and therefore the position remains somewhat in limbo.

As can been seen by the list above, there are more items awaiting legislation and / or enactment than have actually been passed (the balance of announcements remain just that).  As a result, this provides significant uncertainty for individuals, and businesses when looking ahead and trying to plan.

The above impasse in the Houses is unlikely to be resolved soon and therefore the best strategy appears to be to assume that the measures will come in, and planning your business matters accordingly.  For example, businesses and their advisers should be considering how the change in company tax rate is likely to impact dividend policies when balanced with the budget repair levy, and whether recoupment of deferred tax balances can be accelerated or income derivation deferred to a later period.

Should you have any queries in relation to the above, or any other budget measures please contact your relevant ESV Engagement Partner on 9283 1666.