How the 2013/14 Federal Budget effects Social security
Increasing and indexing the income free area for eligible income support recipients
The Government will increase the income free area for eligible income support recipients from $62 per fortnight to $100 per fortnight from 20 March 2014. The Government will also commence annual indexation, in line with the CPI, of the income free area from 1 July 2015.
The payments affected by this change are Newstart Allowance, Sickness Allowance, Parenting Payment Partnered, Widow Allowance, Partner Allowance Benefit and Partner Allowance Pension.
Family and parental payments: change to rules for receiving payments overseas
The Government will change the allowed period of temporary absence from Australia for accessing FTB Part A, Schoolkids Bonus and Paid Parental Leave (PPL) from three years to one year from 1 July 2014.
Australian Defence Force and Australian Federal Police personnel deployed overseas will not be affected by this measure and will continue to be able to access payments while overseas for up to three years.
Family payments: continuing indexation pauses on upper income limits and supplements
The Government will maintain the higher income thresholds for family payments and supplement amounts at their current levels until 1 July 2017.
This measure will maintain the current upper income test limit of $150,000 for FTB Part B, the dependency tax offsets, the PPL Scheme and Dad and Partner Pay. The FTB Part A upper income free area will remain at $94,316, plus an additional $3,796 for each child after the first.
FTB supplement amounts will also be maintained at current levels of $726.35 per child p.a. for FTB Part A and $354.05 per family p.a. for FTB Part B.
Family payments: replacing the Baby Bonus
The Government has scrapped the existing Baby Bonus scheme, effective from 1 March 2014.
Under proposed changes, the FTB Part A payment will be increased by $2,000, to be paid in the year following the birth or adoption of a first child or each child in multiple births, and $1,000 for second or subsequent children.
These amounts would be paid as an initial payment of $500, with the remainder to be paid in seven fortnightly instalments.
Parents who take up PPL will not be eligible for the additional FTB Part A component. As part of this package, parents will be able to count time on Government PPL where it occurs in the work test period for a subsequent child, just like employer-funded parental leave can be counted now.
These changes will see an estimated 28,000 stay-at-home parents who are not eligible for FTB Part A or PPL also miss out on the Baby Bonus.
FTB Part A: changes to age of eligibility
The Government will change eligibility for FTB Part A for children aged 16 years and over. FTB Part A will only be paid until the end of the calendar year a child completes school. This change will start from 1 January 2014.
Note: The Government also announced it will not proceed with the 2012/13 Federal Budget measure of increasing FTB Part A for families with one child by $100 p.a. and $200 p.a. for families with two or more children. The measure was announced to commence from 1 July 2013.
FTB and child care assistance: realignment of time period for income reconciliation
The Government will bring lump sum and income reconciliation periods for FTB and child care assistance, which includes Child Care Benefit and the Child Care Cash Rebate, more in line with the usual arrangements for lodging tax returns.
Beginning with the 2012/13 financial year, families will have 12 months rather than two years from the end of the relevant financial year to reconcile their income, initiate lump sum claims and satisfy any requirements for the end of year supplements.
Extensions will be provided in exceptional circumstances.
Ceasing late registration for the Pension Bonus Scheme
The Government will cease late registrations for the Pension Bonus Scheme from 1 March 2014.
Note: On 20 September 2009, the Government closed the scheme to new entrants and it was replaced by the Work Bonus.
Extending deeming to new account-based pensions
The Government will extend the standard pension deeming arrangements to new superannuation account-based income streams from 1 January 2015.
All such income streams held by pensioners before 1 January 2015 will be grandfathered and the existing rules will apply unless the income stream is changed on or after 1 January 2015.
Superannuation account-based income streams provide the member with a tax-free retirement income stream from age 60 and flexible access to their capital.
This measure was announced on 5 April 2013 by the Treasurer and the Minister for Financial Services and Superannuation.
HECS-HELP discount and voluntary HELP repayment bonus
The Government will remove the discounts applying to up-front and voluntary payments made under the Higher Education Loan Program (HELP) from 1 January 2014.
The following discounts will be removed:
- The 10% discount available to students electing to pay their student contribution up-front
- The 5% bonus on voluntary payments to the ATO of $500 or more.
Under HELP, students choosing not to pay up-front can take out a concessional loan to pay their student contribution, which will be repaid gradually when their assessable income exceeds a minimum repayment threshold, that is, $49,096 in 2012/13.
This measure was announced on 13 April 2013 by the Minister for Tertiary Education, Skills, Science and Research.
Age Pension and the family home
The Government will trial a means test exemption for Age Pension recipients who are downsizing from their family home.
The family home must have been owned for at least 25 years with at least 80% of proceeds from the sale, up to $200,000, to be deposited into a special account by an authorised deposit-taking institution.
These funds, plus earned interest, will be exempt from pension means testing for up to 10 years provided there are no withdrawals during the life of the account.
The exemption will also be accessible to people assessed as home owners who move into a retirement village or granny flat. It will not be available to people moving into residential aged care.
The pilot will commence on 1 July 2014 and be closed to new Age Pension recipients from 1 July 2017.
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