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The Federal Budget was handed down by Federal Treasurer
Wayne Swan last night.
Locumsgroup
has prepared a brief summary of the issues in the budget
that we consider are significant for our clients.
Personal
Tax Rates – No Change, But Remember the Flood Levy
The
Government did not make any changes to the currently
legislated tax rates which apply for the 2010–11 and
following years. However, taxpayers should not forget
that, from 1 July 2011 for one year, those rates will
include the flood levy, where applicable.
Minors
No Longer Entitled to Low Income Tax Offset on Unearned
Income
The
Government will remove the ability of minors (children
under 18 years of age) to access the low income tax
offset (LITO) to reduce tax payable on their unearned
income, such as dividends, interest, rent, royalties and
other income from property, with effect from 1 July
2011. According to the Government, this is to discourage
income splitting between adults and children. However,
income earned by minors from work will still be eligible
for the full benefit of the LITO.
Low Income
Tax Offset: a Little Extra in the Pay Packet
From 1
July 2011, the Government will increase the proportion
of the low income tax offset (LITO) that is delivered
through workers’ week-to-week pay packets from 50% to
70%. This change means that instead of being compensated
after they put in their tax return at the end of the
year, lower income earners are taxed less during the
year. According to the Government, someone with an
annual income of $30,000 will get an extra $300 during
the year in their regular pay.
Dependent
Spouse Rebate for Spouses Under Spotlight
The Government announced it will phase out the tax
offset for dependent spouses aged less than 40 (ie born
on or after 1 July 1971) “to help encourage more
Australians into paid employment”.
This change will mean taxpayers with a dependent spouse
aged less than 40 years will no longer be eligible for
the dependent spouse tax offset (DSTO) from 1 July 2011.
However, the change will not affect certain dependent
spouses – for example, spouses who are permanently
unable to work or who are carers.
No More
Deductions for Youth Allowance Recipients
The Government will amend the tax law to prevent
deductions being claimed against all government
assistance payments, with effect from 1 July 2011. The
announcement is in response to a 2010 High Court
decision which had held that a Youth Allowance recipient
could claim a deduction for certain expenses incurred in
gaining the payment. The Government says the change is
designed to maintain the integrity of the deductions
system.
Medicare Levy
Thresholds Increased for 2010–11
From the
2010–11 income year, the Medicare levy low-income
thresholds will be increased for singles to $18,839 (up
from $18,488 for 2009–10) and to $31,789 for those who
are members of a family (up from $31,196 for 2009–10).
The additional amount of threshold for each dependent
child or student will also be increased to $2,919 (up
from $2,865).
The Medicare levy low-income threshold for pensioners
below Age Pension age will also be increased from 1 July
2010 to $30,439 (up from $27,697). This increase will
ensure that pensioners below Age Pension age do not pay
the Medicare levy while they do not have an income tax
liability.
Excess
Contributions Tax – New Limited Refund
The Government will provide eligible individuals who
breach the concessional contributions cap by up to
$10,000 with a one-off option to request that these
excess contributions be refunded to them. This new
refund option will only apply to first time breaches
from 1 July 2011. The Government expects that this
reform will help to reduce the number of occasions where
the concessional contributions are exceeded resulting in
an excess contributions tax (ECT) assessment.
Minimum
Pension Draw-downs for 2011–12
The minimum annual payment amounts for pensions and
annuities will be reduced by 25% for 2011–12 and will
return to normal in 2012–13. In this respect, the
Government will begin to phase out the 50% pension
drawdown relief that has been provided for 2008–09,
2009–10 and 2010–11 financial years.
Reducing the minimum payment amounts by 25% for
account-based, allocated and market linked (term
allocated) pensions from 1 July 2011 seeks to provide
some assistance to holders of these products to recoup
capital losses incurred as a result of the global
financial crisis.
Concessional
Contributions: Higher Cap for Those Aged 50 and over
The Government will set the proposed higher concessional
contributions cap at $25,000 above the general
concessional cap, for eligible individuals aged 50 and
over with total superannuation balances of less than
$500,000.
The Government has confirmed that the higher cap will
enable eligible persons over 50 to be able to contribute
$25,000 more per year than other workers subject to the
general concessional contributions cap of $25,000. As a
result, when the general concessional contributions cap
increases with indexation from $25,000 to $30,000, the
higher cap will increase by the same dollar amount.
This measure will apply from 1 July 2012.
Small
Business Motor Vehicle Instant Tax Write-off
The Government will provide Australian small businesses
with an instant tax write-off of the first $5,000 of any
motor vehicle purchased from 2012–13. The Treasurer said
that, for example, a tradesman on a 30% marginal tax
rate, buying a new $33,960 ute would receive an extra
tax benefit of $1,275 in the year he purchased the
vehicle. The remainder of the purchase value can be
transferred into the general small business depreciation
pool, which is depreciated at 15% in the first year and
30% in later years.
These reforms will be available to all small businesses,
including sole traders and businesses operating through
trusts, partnerships and companies.
The new small business instant write-off for the first
$5,000 of any motor vehicle will effectively replace the
Entrepreneurs Tax Offset (ETO), which will be abolished
with effect from the 2012–13 income year.
FBT and Cars
– Flat 20% Valuation Rate to Apply
The Government announced what would amount to
implementation of a Henry Tax Review recommendation that
the current statutory rates for valuing car fringe
benefits be replaced with a single statutory rate of
20%, regardless of the number of kilometers travelled.
The changes will apply to new vehicle contracts entered
into after 7:30pm (AEST) on 10 May 2011, and will be
phased in over four years.
People who use their vehicle for a significant amount of
work-related travel will still be able to use the
“operating cost” (or “log book”) method to ensure their
car fringe benefit excludes any business use of the
vehicle.
This is our
initial review of the 2011 Federal Budget. As other
matters come to light these will be discussed with our
clients in the course of our review process.
The Team at
Locumsgroup |
