As we await what promises to be a tough budget this afternoon there are a number of significant changes to tax, superannuation and healthcare that have already been announced.
Gemma Dale, Head of Technical Services at MLC, and her team have put some numbers to those changes ahead of their expected confirmation by Wayne Swan.
Differences in effective tax rates payable on super contributions, taxable salary levels for a range of income earners and cash implications of private health insurance and Medicare levy changes have all been conveniently quantified by MLC Technical Services to help us put the whole hoo-ha in context.
Treasure Wayne Swan has summarised that “It'll be a surplus budget but it'll be a fair go budget as well.”
To make some sense of that vague political puff, here’s a summary of a few of the already announced changes that will affect you.
Personal Income Tax
The low end tax thresholds are the big movers in income tax, with tax rates tweaked to fund the generous increase in the tax free threshold to $18,200. Changes are highlighted in bold.
It’s good news for casual workers and low income earners that can keep their wages below $20,000, now getting off pretty much scot-free from the taxman.
The cash effect of these changes, coupled with a progressively reduced low income tax offset (LITO), will be positive for lower income earners and roughly neutral for those earning $80,000 plus.
The table below gives a good idea of how you can expect to benefit.
As set out in the table, the net income effect is positive for all involved.
Already announced changes to health insurance include reduced rebates for singles earning over $83,000 and couples and families bring home more than $166,000.
The net (after rebate) effect of premium increases is set to impact high income earners significantly, with net premiums increasing up to 43%. Low income earners will not be affected by the changes.
In dollar terms, premiums payable by higher income earners will look something like this.
Along with the changes to health insurance rebates, singles earning over $96,000 and couples and families earning more than $192,000 who don’t have private health insurance will now also have to pay a higher Medicare surcharge of between 1% and 1.5%.
Tomorrow will also see super contribution incentives wound back for high income earners and increased for low income earners. The attractiveness of voluntary contributions for high income earners will wane slightly as its expected that tax payable on those contributions will increase from 15% to 30%.
The table here sets out the tax savings various income levels will make by contributing to their super accounts.
While we can expect these changes to be confirmed by a surly Mr Swan tomorrow, there’s sure to be a few surprises in store too so make sure you check in to get the full wrap tomorrow.