This year the Federal Government delivered a budget that was focused on building Australia’s future workforce and also spending cuts designed to bring the budget into surplus in 2012/13. Also for the first time in 9 years there are no changes to the personal income tax rates and thresholds. This means the 2010/11 rates and thresholds will apply in 2011/12.
Here are some highlights from this year’s Federal Budget:
FamiliesThe government will phase out the dependant spouse tax offset for taxpayers with a dependant spouse born on or after 1 July 1971. This is part of the government’s encouragement to get people back to work. This does not apply to taxpayers who have an invalid or permanently disabled spouse, supporting a career or people who are eligible for the overseas forces and overseas civilian tax offsets.
From 1 July 2011, the Government will increase the amount of the Low Income Tax Offset that is available to low and middle income earners through their regular pay during the year from 50% to 70% of their total entitlements. The remaining 30% of their Low Income Tax Offset benefit will be paid as a lump sum on assessment of their tax returns. Although the individual’s total entitlement won’t change in any one year the adjustment could deliver up to $300 on assessment of their tax returns.
Families who receive the Child Care Rebate (CCR) will have the option of receiving CCR payments directly to their bank account on a fortnightly basis from 1 July 2011. This new option allows parents to choose from a greater range of CCR options and by receiving the CCR payments fortnightly they may receive a fee reduction via their child care service.
Trust Distributions to Minors – From 1 July 2011, the Government will remove the ability of minors (children under 18 years of age) to access the low income tax offset to reduce tax payable on unearned income such as trust distributions or dividends, interest, rent or income from property. Unearned income of minors who are orphans or disabled, as well as inheritances and compensation payments will not be affected by this measure.
Family Tax Benefit
For families with teenagers aged 16 to 19 years old there will be an increase in Family Tax Benefit A up to $4208 a year. This is provided they stay in school or full time training.
Family Tax Benefits will not be increased by the inflation rate for the next 3 years. This also applies to the income limit for the Baby Bonus and Paid Parental Leave Scheme.
The Government Superannuation Co-contribution indexation will remain as is for an additional year to 2012-13. The maximum co-contribution the Government will match is $1000 for people with incomes up to $31,920 with the higher threshold remaining at $61,920. If you want to calculate your Super Co-contribution, click on the link to the ATO here.
http://www.ato.gov.au/individuals/content.aspx?doc=/content/44186.htm
SMSF – The Treasurer announced the SMSF levy will increase from $150 to $180. This levy is imposed on each SMSF and will apply in respect of the 2010/11 and following financial years. This annual levy is part of the annual notice of assessment issued to each SMSF.
There are also reforms relating to SMSF that will come into effect on 1 July 2012. These reforms include:
* The introduction of administrative penalties that the ATO can apply to non compliant SMSF trustees
* Increased legislative restrictions on SMSF investment on collectables and personal use assets (this restriction will apply from 1 July 2011 with all existing holdings of collectables and personal use assets to comply by 1 July 2016.)
* SMSF’s will be required to value their assets at net market value and the ATO to publish valuation guidelines.
* Changes to the registration and rollover processes, and illegal early release penalties to deter the use of SMSF’s for illegal activity.
Pension Drawdown Relief – continues but at a lower rate
The pension drawdown relief which has applied for 2008/09, 2009/10 and 2010/11 financial years will be extended to 2011/12.
However, while the relief for the previous financial years was a 50% reduction in the minimum, the relief for 2011/12 will only be 25% (ie 75% of the normal rate).
The change as it applies to 2011/12 is set out below
|
Age
|
2010/11 |
2011/12 |
Normal – 2012/13 and following years
|
|
55 to 64 |
2% |
3% |
4% |
|
65 to 74 |
2.5% |
3.75% |
5% |
|
75 to 79 |
3% |
4% |
6% |
|
80 to 84 |
3.5% |
5.25% |
7% |
|
85 to 89 |
4.5% |
6.75% |
9% |
|
90 to 95 |
5.5% |
8.25% |
11% |
|
95 & above |
7% |
10.5% |
14% |
These changes will apply to Account Based and Transition to Retirement Pensions.
Presumably a similar relief will apply to market-linked pensions so that the minimum pension limit for 2011/12 will be 67.5% of the calculated amount (compared with 45% for 2010/11). For 2012/13 and subsequent years, the minimum pension limit will be 90% of the calculated amount.
Excess Contributions Tax Relief
Members who exceed their concessional contributions cap in the 2011/12 or a following financial year will be able to apply to the ATO for a refund of the excess. The refunded payment will be fully assessable to the member when refunded.
There are a number of limits to this measure:
1. the maximum amount which can be refunded is $10,000;
2. the measure does not apply to excess non-concessional contributions;
3. the measure will only apply to the first “breach” of the concessional contributions cap;
4. the $10,000 limit will not be indexed.
Concessional Contribution Cap for over 50s
The concessional contributions cap for the over 50s will be $25,000 more than the cap for under 50s.
This change will apply from 1 July 2012.
Currently the general concessional contribution cap is $25,000. When this cap increases to $30,000 (it can only be indexed in multiples of $5,000), the over 50s cap will be $55,000.
The previously announced requirement that an individual must have less than $500,000 in super savings to be eligible to access the higher cap still remains.
Small Business
The Government will allow small business to claim up to $5000.00 as an immediate deduction for motor vehicles acquired in the 2012-13 financial year. The vehicle will then be depreciated at 15% in the first year and then 30%.
Also in the 2012-13 year the Government announced that any new business asset worth less then $5000.00 can be written off immediately from the 2012-13 financial year.
There are also wage subsidy benefits to business owners who employ people who have been long term unemployed or who hire people with a disability.
The Government has also decided to abolish the Entrepreneurs Tax offset for small business from 1 July 2012 which will save the Government $370 million.
The Government will also reform the Fringe Benefits Tax on salary packaged cars. The current method for determining the taxable value of car fringe benefits will be replaced with a single rate of 20% regardless of the distance travelled. The current calculated fringe benefit decreases the more the vehicle has travelled.
The new tiered reform will apply to new contracts started after 10 May 2011. This reform will be phased in over 4 years:
|
Distance Travelled |
Current Rate |
From 10 May 2011
|
From 1 April 2012
|
From 1 April 2013
|
From 1 April 2014
|
|
0-15,000km |
26% |
20% |
20% |
20% |
20% |
|
15,000 – 25,000 km |
20% |
20% |
20% |
20% |
20% |
|
25,000 – 40,000 km |
11% |
14% |
17% |
20% |
20% |
|
> 40,000 km |
7% |
10% |
13% |
17% |
20% |
If you have any queries about this year’s Budget, please don’t hesitate to contact us on
08 8373 1702.