With the announcement of the 2014 Budget on the 13th of May it’s highly likely we will all be paying more tax in some shape or form with some significantly more than others.
• For those that earn in excess of $180,000 it means a 2% increase in income tax (Budget Repair Levy) on the portion above $180,000 meaning on $200,000 you will pay an extra $400.
• The majority of the population will be affected by the 0.5% increase in the medicare levy taking it from 1.5% to 2%.
• For those that were born before 1st of July 1957 and still working (Pre-Retirees), earning less than $53,000 currently will lose the maximum $500 Mature Age Tax Offset this equates to an out of pocket tax increase of approximately 1%. Those earning between $53,001 & $62,999 will lose their part entitlement of the Mature Age Tax Offset.
• In addition for those that are currently entitled to the Dependent Spouse Tax Offset there is a further maximum loss off $2,471. On an income of $40,000 this means an increase in out of pocket tax equating to a further 6.17%.
• There will be many families that will be affected by the proposed changes to the entitlement of Family Tax Benefits which will mean potentially less money in the pocket.
• Not to mention the indexing of fuel excise to commence on the 1st of August this year which has been frozen for 13 years at 38.1 cents per litre.
The following only constitutes my personal opinion: It will be the Pre-Retirees earning low to middle income that will be potentially hit the hardest especially those that are currently entitled to the Dependent Spouse Tax Offset and Mature Age Tax Offset. Even though the Government hasn’t announced a specific increase in tax for workers in these marginal tax brackets they have cleverly structured a significant tax increase for Pre-Retirees. The outcome for some Pre-Retirees could look a little like what the table below reflects. This comes at a critical stage in their lives where they should be able to bang away more bucks for their nearing retirement years.
Where were the Budget Headlines “Major Tax Increase for Pre-Retirees”?
In comparison a high income earner on $200,000 only has a tax increase of $1,400 as a a result of the 2% Budget Repair Levy and the increase in the Medicare Levy, this equates to an increase of only 0.7%.
With the proposed changes and the potential impact to pre-retiree’s it’s becoming more evident of the importance for Pre-Retirees to seek Professional Financial Advice. There are a legitimate number of ways that tax can be significantly reduced and at the same time bang away the bucks to fund our ever increasing Retirement years as we continue to live longer. It’s more critical now than than ever before for Pre-Retirees to get advice in combating the potential increase in taxes and at the same time making sure they have enough in retirement.
What’s more concerning as many people don’t understand the tax system and rely on their accountants to process their tax return many aren’t aware that they may be receiving the tax offsets discussed. This means it will come as an unwelcome surprise when they do their tax return in the future and realize they are paying significantly more tax than in previous years.
I urge anyone that falls into this category to contact your Financial Planner or Adviser to discuss the possible strategies or alternatively I welcome you to make contact with us at Integral Financial Planning on 0755592250 and take the opportunity for a free consultation to discuss the possible strategies by completing our online appointment request.
Any advice on this site is of a general nature only and has not been tailored to your personal circumstances, please seek personal advice prior to acting on this information.
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