2014 Federal Budget: Food for Your Budget Thoughts

There is little room for escape from less disposable income from the budget, with family tax benefit changes, tax offsets shriveling up and disappearing, increasing tax rates, and reindexation of the fuel excise.
Unless you think about it a bit.
When the fuel excise indexation stopped 12+ years ago most of us were driving motor vehicles that were far less efficient.  There have been significant cumulative improvements in vehicle efficiency in the last decade or so, that for many, means household petrol costs now are less than they were 15 years ago, despite much higher fuel prices.
And if the petrol is too much, use public transport a bit more, or the soles of your feet.
How many live in a street where everyone’s default movement from their front door is almost invariably to their vehicle door, rather than in sneakers and down the footpath.
And check your grocery receipts.  Do you have lots of asterisks identifying all the items that you are paying GST on?  There are very often the bad, unhealthy, naughty stuff that your great grandparents probably would not recognise as ‘food’.
Food, in its purer forms, is exempt from GST.  So if you are buying pizzas, take-away coffees and brioche, sweetened drinks and yogurt and chips and ice cream and frozen meals, you might find you are paying quite a bit of GST on your regular grocery runs.
Swapping these items for fresh fruit and vegetables (veggie patch, anyone?), rice, fresh meats, etc, and you might find (1) you save money (2) you enjoy a healthier weight.
So save tax, be healthier, and avoid the Budget nasties!

2014 Federal Budget: Won’t Work for $7

Fortunately living in the lucky and wealthy first world country of Australia means Australians don’t go to work for less than $7 an hour.
But we want to have a whinge about paying a $7 fee, after we have visited a doctor more than 10 times per 12 monthly period (the first 10 are free, and the next 10 incurring just $70 in cost).
Oh please – that must be an insult to your GP, as you sit there with that scary mole on your leg, you are gasping for breath for no apparent reason, or have other private health problems we probably do not need to ventilate here, and you are relying on the highly experienced and educated professional peering over you across the desk to save your life.
That an Australian can go to a doctor 20 times in one year and pay less than $100 is a luxury most people in the world would love to swap with us, to access the world-class doctors most of us have access to.
I’d rather see my local GP, have him paid well, have the support of the Australian medical system, and enjoy the first-world treatment we seem to take for granted.

2014 Federal Budget: Negative Gearing Back in Vogue

From 1 July 2014 the effective top marginal rate of tax on income over $180000 jumps to 49% from 46.5% currently, because not only is the ‘temporary’ budget repair levy coming in but the Medicare Levy of 1.5% is also slated to increase to 2.0%.
Whilst the move of 2.5% to 49.0% may not sound dramatic, to realise this is a 5.4% increase in proportionate terms makes in material (in accounting terminology at least!).  And it may be more noticeable once you start paying the higher tax without the commensurate pay rise.
Another factor for salary packaging that is likely to affect some from 1 July 2014 is the increase in the superannuation guarantee, from the current 9.25% to 9.50%.
For very high income earners, there is going to be a noticeable drop in take-home pay, that just may slow down overseas holidays, luxury car purchases, and payments on the multi-million dollar home loan.
If there is money left over and an effective marginal tax rate of 49% including the Medicare Levy, negative gearing into shares and property will be on the agenda.
The strategy may be future property positioning, is to spend a bit less on the multi-million dollar home to leave enough over to negatively gear some investments and get some favourable tax refunds at 49% of every dollar.
At the top rate from 1 July 2014, $100,000 of negative gearing will provide a tax refund of $49,000.

2014 Federal Budget: Budget Economics – Not Tough Enough!

The 1990s recession that brought on the budget deficits provided a basis for the Budget to ‘whir’ back into surplus as the Budget recovered with the economy and unemployment payments fell away and consumption and personal taxes rose.
It is extraordinary to think that despite the GFC of 2008 to 2010, Australia has enjoyed amazing economic sunshine of no recessions for 20+ years but now can’t produce a Budget Surplus to lean against the cumulative hundreds of billions of debt accumulating since the 2009 tax year.
With around $60bn of deficits now estimated for 2014 to 2018, there is merit to the argument that the Commonwealth Budgets are not paying for themselves, and either spending should be cut more or revenue increased more than it has already.
The current Budget situation is not the fault of the current Government.  Frankly, with hindsight, the seemingly strong surpluses of the Howard-Costello years were actually not strong enough and did not provide sufficiently for a resources downturn (luckily it was not a bust!), so the Liberals are not entirely faultless.  But the Rudd-Gillard-Swan ‘gang of three’ consistently failed to meet expectations and made promises and funding commitments without providing the revenue to support cost requirements.
True enough, Australia has a relatively low debt compared to other countries, but comparing to other countries is not a level playing field.  With our vast and valuable natural resources the current Budget and debt situation is a comprehensive failure of budgetary policy.
And we just don’t know what is around the corer – if we can’t produce a Budget surplus in the good years, it is frightening to think what Budget deficits will arise if we have another ‘x factor’, be it another terror or security failure, global financial crises, Asian credit squeeze, tech bust, dramatic turn in the Chinese economy, etc.
Our debt may not be so benign then.  And tax rises or $7 dollar doctor visits may not be the worry then, with the Australian dollar being impaled, inflation souring, unemployment bolting and property prices plunging. 
That is why the 2014 Federal Budget, like the ones of recent years at least, was not tough enough.

2014 Federal Budget: Mega Millionaire Dangers

With the age pension age increasing the Government is pondering whether age restrictions on accessing superannuation balances should change.
With mature Australians needing to wait until they are 70 years of age by 2035 before they can access the pension, many will need to continue working unless they have sufficient capital to allow an early retirement.
The danger is that wealthy Australians put ‘too much’ of the investment assets into superannuation, and then can’t access it at a new a higher age set by the Government, and are forced to work until they are eligible to access their superannuation income stream.
If wealthy superannuants are preventing from accessing their superannuation then they will be competing with the pre-pensioners for the same jobs. 
So in 2035 there could be two 68 year-olds, one with 5 million dollars in superannuation and the other with nothing in superannuation, and they are both competing for the same job because neither of them can access a retirement income, from either superannuation or the age pension.
This is why the Government should not increase the preservation age for accessing superannuation benefits, at least where the superannuant has sufficient assets locked away to properly fund their retirement.