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Money / Financial management

2014 Federal Budget: Six things you need to know

It’s beneficial to invest time keeping abreast of new tax year changes. Here are six things you need to know about the 2014 Federal Budget.

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The latest Federal budget contained a number of matters that directly impact on the majority of small businesses in Australia.

Tax rate changes

There is only one change to mention when it comes to personal income tax rates, but for those affected, it can be a significant factor in decision making

For those whose taxable income exceeds $180,000.00, the temporary budget “deficit levy” of 2 percent of taxable income will apply to every dollar of taxable income over and above $180,000.00. This levy will remain in place for the next two financial years.

Increase in Medicare levy

The current Medicare Levy of 1.5 percent will rise to 2 percent from 1 July 2014. This will impact on the PAYG withholding that applies to all employees of businesses in Australia. The Medicare Levy Surcharge imposed on those who exceed the applicable income thresholds and do not have appropriate levels of private health insurance also remain in place for this financial year.

Loss carry-back rules repealed

In the 2013 tax year a transitional measure applied where small businesses could offset 2013 losses against 2012 taxable profits to generate a refund of tax paid on 2012 profits, rather than carrying forward 2013 tax losses. The Government is seeking to legislate that these no longer apply to 2014 taxable losses. Time will tell if the Senate allows this measure to pass. 

"Some changes can be advantageous in tax planning and tax minimisation strategies, whilst other changes can result in significant penalties and headaches."

Got employees? You need to read this. 

Employee superannuation contributions

The budget contained measures to delay the rate of increase in the compulsory SGC you must pay for your employees, but the minimum percentage of SGC has risen from 9.25 percent to 9.5 percent, effective from 1 July 2014. Based on current proposals the rate will remain at 9.5 percent until 30 June 2018.

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You need to ensure that this increased obligation is factored into budgeting for the new financial year. 

In order to ensure you are paying the proper rate, hanging onto old versions of desktop software is no longer wise, not that it ever was.

Minimum wages increase

The recent decision handed down by the Fair Work Commission has seen the federal minimum wage rise by 3 percent from 1 July 2014. This is on top of the previously mentioned SGC increases. 

To be fair, the Fair Work Commission did set the increase at less than the unions asking point, taking into account the extra superannuation contributions that also take effect from 1 July.

Concessional super cap changes

From 1 July 2014 the concessional superannuation caps have increased to allow all Australians to contribute a maximum of $25,000.00 per financial year into their superannuation. 

The big benefit is for those aged 50 and over who can now contribute up to a maximum of $35,000.00. For those of you taking advantage of these higher concessional amounts, it can result in immediate tax savings and investing in your own retirement at the same time.

These are only some of the changes, there are many more. Some changes can be advantageous in tax planning and tax minimisation strategies, whilst other changes can result in significant penalties and headaches. If you’re unsure about how the changes will impact your business, be sure to speak with your accountant or financial planner. 

What are your thoughts?

John Corias

is a senior partner at m.a.s accountants and is passionate about growing, building and developing small businesses.

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