If you didn’t realise, there was a Federal Budget handed down recently. There are always many things that are packed into a budget, but how does all of it affect us? There are several areas that will apply to most of us, and I have tried to simplify it as much as possible in this post. Please let me know if you would like to know more about how you can benefit, or whether it affects you in any way, and I’ll be happy to help.

At the bottom of each subject is a link to my free information site ASKABOUTMONEY.COM.AU, which explains everyday financial subjects in easy to understand terms. Please tell me what you would like to hear about, and I’ll find the right professional to talk about it.

So what happened that would affect you ? Here’s a run down of some of the 5 main points outlined in the budget in plain English.

1. Maximum Government Co-contribution reduced
You may or may not know about the government’s scheme to help superannuants in their pursuit of a self-funded retirement. Basically, if you earned under $65,000 year and paid into super ‘after tax’ payments, the government would pay 150% of whatever you paid up to $1500 year.

This helped many people boost their super by a little extra over the past few years. So much so, that they have decided to cut back for a couple of years to match whatever you pay into super $1 for $1 up to $1,000 year. This will be like this until 2014 when our economy is supposed to be kicking along. So, possibly don’t hold your breath for that to happen.

2. Small and insoluble lost accounts to be transferred to the ATO
You know all those super funds that you have accumulated over the years when looking for the ideal job? All the casuals know what I’m talking about. Well, from 1 July 2010, superannuation providers will be required to transfer accounts of lost members with balances of less than $200 (small accounts), and those which have been inactive for a period of five years and have insufficient records to identify the owner of the account “insoluble accounts” to unclaimed monies.

This means, when you finally get around to consolidating all these funds together, you only have to visit the ATO, and they will have all of your money. You can visit www.protectmywealth.com.au/combine-my-super.html to submit an enquiry about bringing all your supers together. It’s very easy, and cost effective. We’ll look at why in another post.

3. Private Health Insurance Rebate
From 1 July 2010 the Government will introduce a 3 tiered approach to determine the amount of private health insurance rebate payable to individuals. Once income is above $120,000 for singles and $240,000 for couples, no private health insurance rebate will be payable.

Their reasoning for this is that people on those income brackets ‘should’ be able to pay for a Dr. But as every normal thinking human would know, this will only send many of them packing straight to the struggling public health system, which can’t cope as it is! Maybe they should’ve consulted their trusty State government’s first to sort out the mess they’ve left it in.

4. Medicare Levy Surcharge increase

To ensure that middle and high income earners do not abandon their private health insurance the Government has introduce variable rates of Medicare Levy surcharge, if appropriate private health insurance cover is not held and certain income thresholds are exceeded.

It’s a step in the right direction, however, there should be more concentration on getting the States to pull their finger out than mess around with private health insurance.

5. First Home Owner’s Grant Boost - extension

The Government have announced that the First Home Owners Boost (FHOB) will be extended for a further 6 months.

For eligible first home buyers who enter into contracts between 1 July 2009 and 30 September 2009, the FHOG will continue to provide $7,000 for the purchase of established homes and $14,000 for the purchase of new homes. Combined with the first home owners grant eligible persons who purchase an existing dwelling will receive $14,000 of assistance and where eligible persons purchase a new dwelling they will receive $21,000 of assistance.

For eligible first home buyers who enter into contracts between 1 October and 31 December the FHOB will be halved. Where an existing dwelling is purchased, an eligible first home buyer will receive $3,500 of assistance where as if an new dwelling is purchased they would receive $7,000 of assistance. Coupled with the first home owners grant, eligible first home buyers will receive $10,500 assistance for an existing dwelling and $14,000 of assistance for a new dwelling. $21,000 of assistance.

6. Small business tax relief For eligible assets acquired between 13 December 2008 and 31 December 2009

As part of previous stimulus packages, the Government had announced that small business (those with a turnover of less than $2million) would be able to claim a bonus tax deduction for the acquisition of eligible assets, in addition to the usual capital allowance deduction. Initially set as a 10% bonus deduction, then 30%, the bonus has again been lifted to 50%.

To be an eligible asset for this bonus, the asset must:
– cost more than $1,000
– be purchased between 13 December 2008 and 31 December 2009
– be used or installed ready for use by 31 December 2010.

As an example of the benefit this provides, for every $1,000 of eligible asset acquired, the total tax deduction will be $1,500. A $1,500 tax deduction provides a tax saving of $450. Therefore the overall after tax cost of $1,000 acquisition would be $550. So, if you were to buy a car, or machine for more than $1,000 before 31 December 2009, you will be entitled to an extra 50% tax deduction. This is great news if you are wanting to buy a car, especially with the new and used car industry in such dramas at the moment.

It’s definately prompted me to look into a car before the end of the year.
I’ll explain some of the changes in future posts, so if you are wondering what some of this is all about, it will be coming.
PD