Crack hidden fortune

If you look deep enough, you may find some positive news in the Federal Budget, writes Anthony Keane

IT’S tough finding financial benefits in a Federal Budget that slashes rather than spends, but there are always areas where people can improve or protect their personal finances.

Last week’s Budget was described by some economists as the dullest they’ve seen – largely because many of the spending promises in areas such as disability, education and aged care were previously announced.

It has had a mixed response from the investment community, with the superannuation industry relieved there was no fresh tinkering, but the property sector upset there was nothing to stimulate housing, and businesses annoyed by tax changes.

Today we look at some of the key areas where you can extract some good fortune from the Budget.

Home in on benefits

James McGill, general manager of business services at KeyInvest, says the Budget has nothing overly positive but nothing overly negative.

‘‘ In this market you would not expect it because we can’t afford it,’’ he says.

People nearing retirement and retirees benefit more than most, McGill says, particularly through a new $112 million trial program that allows age pensioners to downsize their longheld family home and have $200,000 of their surplus funds not counted towards Centre- link’s assets and income for a decade.

We see a lot of people who are literally stuck in their family home. They have the money to get the services, support and lifestyle they need but don’t want to sell the home because it hits their Centrelink entitlements,’’ he says.

This Budget does do something for them.’’

However, Retirement Living Council executive director Mary Wood says the pilot program falls short of meeting the needs of most pensioners.

‘‘ The proposed eligibility requirements, which includes the stipulation that applicants have owned their home for at least 25 years, is overly onerous and don’t reflect the needs and circumstances of most aged pensioners,’’ she says.

Super strategies

Superannuation changes in the Budget were announced last month after a public outcry about constant government fiddling with super.

The Financial Planning Association welcomed the Budget.

We are happy to see Treasurer Wayne Swan (pictured, right) has avoided changes that would reduce incentives and benefits of the system,’’ FPA general manager policy and standards Dante De Gori says.

REST Industry Super chief executive Damian Hill says pre-retirees will be able to take financial advantage of the taxdeductible super contribution cap rising from $25,000 to $35,000 for over-60s from July this year and for over-50s from July next year.

However, he concerned that a 15 per cent tax on retirees’ pension earnings above $100,000 a year will hit a lot more people than the 16,000 the Government has forecast because of the money it will cost super funds to administer it. While it’s a tax on a few, it’s an administration burden on many.’’

Budget changes to deeming rules from 2015 mean retirees should review their situations, Hill says.

Beat the coming cuts

The Government’s axing of the Baby Bonus from March next year means that potential parents have just one week to conceive if they don’t want to miss out on the cash.

It’s an example of how Budget changes can impact our finances, and how we need to be aware.

Another example is the introduction of a $2000 cap on tax deductions for selfeducation expenses from July next year. A Colonial First State budget briefing paper says self-education expenses such as attending conferences, travel and accommodation can be expensive and easily breach the $2000 cap. People may have to spread out selfeducation expenses over different financial years to stay within the annual limit and take full advantage of deductions – for example, paying for the course in June and purchasing textbooks in July,’’ it says.

Tax offsets for large medical expenses are also be cut from July. CFS says people who are considering elective medical procedures that qualify for the offset may wish to bring forward the treatment this financial year.

Take time with tax

KeyInvest’s McGill say there are lots of small changes to entitlements and taxes.

‘‘ I think that people are going to have to spend more time searching for ways to minimise the impact on their own financial situation, because it’s getting harder and harder to see where the pain is coming from,’’ he says.

People are going to have to be a lot smarter. Whether Labor or Liberal it doesn’t matter – for the next 15-to-20 years people are going to have to work harder to minimise tax and maximise their benefits.’’