The aim was to get the budget back in the black at all cost and that was delivered. To do this some of the tax increases have been aimed squarely at higher income earners – namely:
- contributions tax increased from 15% to 30% for those earning over $300,000
- reduced employment termination tax offset – possibly double the pain for some of the public sector employees to be made redundant!
However the deferral of the concessional contribution cap will impact middle income earners. For the next two years the maximum that can be contributed to super via concessional contributions ( ie. super guarantee, salary sacrifice and personal concessional contributions) will be $25,000.
Consider a couple both aged 60 earning an annual income of $70,000 each. They have spent the majority of their working life paying off their home and raising a family. They are now finally in a position to self fund their retirement. Without the debts and the kids, it is not unreasonable to expect that they could save $30,000 pa each in super for the next few years. Now for the next 2 years they will be limited to $25,000. What a short sighted policy – raise tax revenue now = greater burden on the government in the future.
Some other thoughts:
- the reduction in company tax rate that was much need by the small business sector has been abandoned
- the 50% discount for interest income designed to encourage saving has also been abandoned
You can find a full wrap up of the key budget measures here.