What does the budget mean for you?
The much-hyped first Budget of the new Coalition government was recently handed down, with some big changes in store for Australian families. If the proposed Budget is passed, what will it mean for homeowners like you?
Keeping interest rates low With low interest rates staying low, now is a good time to review your budget and work out if you can make higher payments to reduce the life of your loan. Improved employment and low mortgage rates are likely to maintain the demand for property and growth in house prices.
Investors and the Budget As an investor, particularly if you’ve invested in smaller companies, you’re likely to see bigger dividends because of the expected higher economic growth and low interest rates. However if you’re relying on cash and term deposits to generate income, the continued low interest rates mean you might see your returns fall. If you’re investing in a maturing term deposit, you might need to accept lower rates to lock in your return, or look into other investments, which might carry more risk.
Temporary Budget repair levy You might’ve heard of the Temporary Budget Repair Levy, but do you know how it will affect you? A temporary tax will apply to taxpayers who earn over $180,000 from 1 July 2014 for three years. Here’s an example of what it’ll look like if you earn:
Up to $180,000 - you’ll pay no levy Up to $200,000 - you’ll pay a levy of $400 per year Up to $250,000 - you’ll pay a levy of $1,400 per year
First Home Savers Accounts axed The First Home Savers Account scheme was introduced by the government to help first home buyers into the property market. The scheme saw a 17% government contribution for deposits of up to $6,000 each financial year (a maximum of $1,020 each year). Citing low take up of the scheme, Treasurer Joe Hockey announced the contributions would end this financial year. New accounts opened after 13 May, 2014 would not be eligible for the bonus.
The pension age is changing Turning 55 this year? Well, the proposed changes to the pension age will affect you - the pension age is on the rise again. At the moment, you need to be 65 to be eligible for the pension. In this Budget, the pension age is proposed to gradually increase to 70 by 2035, affecting anyone born after 30 June, 1959.
You might have to work later in life to cover the gap left by the pension for those five years, unless you have enough savings to retire earlier.
How cost of living is impacted With all the discussion on the Budget’s impact to business and the economy, what does it mean for you in your everyday life? Here are some key pros and cons: <table style="height: 275px;" width="815">
Abolition of the carbon tax will reduce your bills
The deficit levy increases tax for high income earners
Additional jobs will be created by new infrastructure projects
Family tax benefit eligibility is limited
Reduction in company tax may increase dividends paid to shareholders
Age pension and disability support pension eligibility is limited
Continued low interest rates
You’ll now pay a co-payment to visit your doctor and extra charges for prescriptions