Don’t let the 2014 budget cripple your finances

The 2014 budget is certainly receiving a lot of publicity, which budget doesn’t? Whilst the governing parties go back and forth on what is right and what is wrong, one thing is for sure, family budgets are going to feel some pressure.

With the rise of everyday living costs such as utilities, cuts to certain benefits and additional taxes now being implemented, what can Australian families do to get ahead? The first thing is to review the Federal Budget to see what components are relevant to your household. The next step is to review your family budget and start making adjustments.

One area that Low Income Loans Australia had a strong interest in was the shutdown of government agencies and which ones would go. It was mentioned that the funding for free financial counsellors was to get the chop. Luckily financial counsellors will maintain their funding!

This is great news as they provide assistance to over 200 thousand Australians each year who are struggling with finances.

If you find yourself unable to maintain your household budget due to increasing household costs and cuts to certain benefits – don’t panic. Be wary of taking out any short-term or payday loans to help with finances as this is not a solution to your problems and a potentially make things worse.

Taking control of your finances does not have to be stressful or difficult. As mentioned, review or create a detailed budget to see where you stand. If you need additional help there are still great non-profit and government financial initiatives to help you with low to no interest loans along with other financial assistance. In addition, free professional financial counsellors will still be able to operate and assist with money matters.

Be proactive with your finances and make things happen. Whilst there may be hard decisions and sacrifices made, managing your money is the only way to get ahead.

 
Below is a summary of the 2014 Federal Budget (sourced from the Barefoot Investor):

Everyone:
• We’ll have to pay $7 every time we visit the GP.
• Medical scripts to cost up to $5 more.
• Petrol prices to increase, with the fuel excise to rise.
• The First Home Saver Account will be scrapped.
• Low Income Super Contribution scrapped.
• Compulsory employer super contributions to pause at 9.5% for three years.

Government:
• 16,500 public service jobs to go.
• The establishment of a $20 billion Medical Research Future Fund.
• Major spending on infrastructure.
• Defence budget to increase to 2% of GDP.

Businesses:
• Company tax rate to reduce to 28.5%.
• Government incentive to hire over-50s with a potential $10,000 payment available.

High income earners:
• Anyone earning over $180,000 will pay an extra 2% per annum tax for the next three years.

Students and Young People:
• Universities will have the ability to set their own fees.
• Scholarships will be available to disadvantaged students.
• Student loans will be subject to interest instead of CPI indexation.
• From July 2016, students will have to pay their loans back sooner, starting once they earn over $50,638 a year.
• Trade support loans available for apprentices of up to $20,000.

Families:
• Schoolkids Bonus scrapped.
• Current Family Assistance payments frozen for two years.
• From July 2015, Family Tax Benefit part B will not be available to those earning more than $100,000 per annum.
• Paid maternity leave scheme capped at $50,000, as opposed to $75,000.

Pensioners:
• The age pension eligibility age to increase to 70 by the year 2035. This is in addition to the previous government’s decision to increase the age pension age to 67 by 1 July 2023. The preservation age — which is the age at which superannuation can be accessed — has not been increased by the government, yet. The preservation age is around 60-years-old now but no announcements have been made for this to be increased.
• From 2017 the pension will be indexed by inflation instead of wage growth.
• Thresholds for the deeming rate on financial investments are going to reduce — this will increase assessable income for Centrelink purposes which may result in a lower rate of payment.
• Commonwealth Seniors Health Care Card holders will lose the pension supplement — currently worth $1,320.80 per annum for couples and $876.20 per annum for singles.
• Tax-free superannuation pensions will count towards the income test for the Seniors Health Care Card.

People with a disability:
• NDIS remains unaffected.
• Disability support pensioners will be subject to rolling eligibility checks.
• Those under 35 will face a tougher rules to remain on the pension with a focus on capacity to work.

The unemployed:
• Those aged under 25 will need to “earn or learn”.
• People under 30 will need to wait six months to be eligible for Newstart and once on payments will be subject to a work for the dole scheme.

This is definitely a tough budget which will make things tough for many Australian families. What will you do to stay on top of your finances?

Image courtesy of Stuart Miles / FreeDigitalPhotos.net