Are you affected by the Australian government budget changes?

The Australian government's 2013/2014 budget was released a couple of weeks ago. It is basically a document the government releases every year outlining what they intend to spend our taxes on.

You might have heard that our country has a $18 billion budget deficit. This means our government plans to spend $18 billion more than it receives for the upcoming year. Obviously this is unsustainable in the long run so eventually our government has to either raise taxes or cut its expenditure. You may notice that most of the relevant tax changes are about saving money for the government.

Do these changes affect you?

• The baby bonus of up to $5,000 as we know it will be gone from 1 March 2014. Instead, mum's will receive $2,000 more in Family Tax Benefit Part A (if you are eligible) for their first child, and $1,000 more for any subsequent children.
  

• The medical expenses tax offset where you could claim 20% of your family's medical expenses over a certain limit will be phased out. Fortunately it can still be claimed for disability aids, attendant care and aged care related expenses for people who really needed it.
  

• While the Medicare levy will probably increase to 2% from 1 July 2014, the low income exemption thresholds have increased slightly to $32,279 for pensioners, $20,542 for other individuals and $33,693 for families with each child increasing the limit by $3,094.
  
• There will be no more discounts for up-front and voluntary payments towards Higher Education Loan Program (HELP or HECS for us oldies) from 1 January 2014. Currently you get a 10% discount if you pay your student contribution up-front and a 5% discount for any voluntary payments of at least $500 made afterwards.

And to save those of you who like to ask me what they are, here are the individual income tax rates and thresholds for last year and the financial year about to end so you can compare them.

Let me know if any of these changes concern you while I work on my next post which will be on how the budget changes may affect those of us with businesses.

How the Medicare levy increase will affect you

Whenever there is a tax hike it usually makes big news because everyone hates paying more taxes. Around two weeks ago, Julia Gillard announced that her government is proposing to increase the Medicare levy from 1.5% to 2% to help partially fund the National Disability Insurance Scheme (NDIS).

Yes, we should help the disadvantaged in our community and it has been reported that the NDIS supports around 410,000 people with disabilities around Australia. While it is for a good cause, I still hate paying more tax! Below is a table of roughly how much more you would have to pay once the increased levy starts:

Since the Prime Minister's announcement, the Liberal opposition is now considering to support the levy increase but perhaps reduce the levy later on when the nation's budget is in surplus. This means either way the tax hike is probably going to happen.

Now like most Australians, I'm usually politically neutral and enjoy a good laugh when a comedian does a funny impression of a politician. Plus I recently realised that my vote is practically useless because my electorate where I live is something like 99.99% Labor (figure is exaggerated but it is a strong Labor seat).

I can reveal that I do vote Liberal because I run a small business that supports other small businesses and I have found that Liberal party policies generally favour small business owners. I said generally so please do your own research before voting later this year!

For all the mums and soon-to-be-mums out there, I hope you have a lovely weekend and...

Business plans are important

I thought I would quickly write about what business plans are and their importance since I did mention them in my last post and some people have already asked about them.

What is a business plan?
A business plan is basically a document that outlines your business goals and how you are going to achieve them. It is important to write plans down in a document rather than keep them in your head because then you can refer back to it later to see what worked and what didn't. Business plans are most commonly prepared at the start of a business but they are equally crucial no matter where your business is in its life cycle since you should always be aiming for your next goal.

Why do I need a business plan?
People are usually forced to create one because they need to borrow money to start their business and it is a bank requirement to see your business plan. Sometimes landlords (in shopping centres particularly) will also ask to see one before they offer you a lease for your business premises.

Regardless of whether you are required to show it to your bank or landlord, all business owners should have a plan in place so you know where to prioritise your time and efforts.

What is in a business plan?
It really depends on you as some people like to write long term goals whereas other people like to keep goals between one and five years. Regardless of the time frame, your business plan needs to address how you are going to achieve those goals and more detailed plans will actually contain some of the following:

• A marketing plan
• Finance requirements and budgets
• Operation procedures
• Human resource strategy
• Strategies and contingency plans to overcome possible threats

Business plans are important documents and is a vital tool for business owners especially when the going gets tough and they feel as if they are losing control. If you would like help writing or updating your business plan then contact me so we can get started straight away because...