![]( "Budget in a nutshell")
- Budget in a nutshell
Despite the rhetoric about this being a tough Budget, this one is made of marshmallow and prayers.
Over the next four years, Mr. Swan estimates that tax revenues will leap an astonishing 40% to $115 billion and spending will ‘only’ go up by $55 billion.
Despite this year’s deficit already being $8 billion worse than forecast in the November mid-year update, Mr. Swan is predicting that the deficit will halve this coming year (to $26bn) and be eliminated in 2012/13.
This is optimism redefined. This is wing-and-a-prayer stuff with all fingers and toes crossed.
But now the good news. This is a government with a history of meddling and making stuff ever more complicated (great for accountants and financial advisers!). However there are few significant changes in this year’s Budget to the Superannuation and Tax Laws. It could have been worse.
Below are some of the details that might affect you:
No changes to Personal Income Tax Rates and Thresholds
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For the first time in nine years, there were no changes to the personal income tax rates and thresholds. The 2010/2011 rates and thresholds will apply in 2011/2012 as shown below.
However, don’t forget the Flood Levy. The Government has reaffirmed the implementation of the temporary Flood and Cyclone Reconstruction Levy (Flood Levy). The levy will apply to taxable income included in both a resident and non resident individual’s tax return for the 2011/12 financial year only. The table below outlines the income thresholds and the rate of levy applicable.
Minors ineligible for Low Income Tax Offset (LITO)___________________________________________________________________________________________________________
From the 1st July 2011, the government will remove the ability for minors (children under 18) to access the LITO to reduce tax payable on non employment income. This will effectively reduce the tax free threshold for minors from $3,333 to $416 per annum.
Family Trusts will need to review their distribution strategies from 1st July 2011 to take into account these changes. Investments held directly in the name of a minor may also need reviewing to ensure the $416 per annum is not exceeded.
Reduction of the minimum payment for super pensions _______________________________________________________________________________________________________
Rather than end the pension draw down relief that has been available to account based pensions and term allocated pensions since 2008/09, the Government will phase it out. For 2011/12, the standard minimum draw down for pensions will be reduced by 25 per cent. Minimum payments are set out below;
Excess contributions tax relief from 1st July 2011 ___________________________________________________________________________________________________________
The Government has announced it will provide a once-only opportunity to withdraw excess concessional (deductible) contributions made during the 2011/12 or later financial years. This withdrawal opportunity is limited to excess concessional contributions of up to $10,000 (not indexed).
Instead of being subject to excess concessional contributions tax of 31.5% and contributions tax of 15% within a super fund, the refunded excess concessional contributions will be assessable personally to the client and taxed at their marginal tax rate.
This measure will assist clients who unintentionally breach their concessional contributions cap in future financial years. It is a one off provision so care will need to be taken as more than one breach will result in penalties.
The most common area we see this being utilised is when there are timing issues with regards to superannuation guarantee or salary sacrifice contributions being made by an employer.
Concessional contributions cap ____________________________________________________________________________________________________
The Government has amended its previous announcement regarding a permanently higher concessional cap for those aged 50 or over with a total super balance of less than $500,000.
The Government has now proposed that the higher concessional cap for eligible clients will be $25,000 higher than the standard (indexed) concessional cap. This replaces existing proposal that a non-indexed cap of $50,000 would apply.
No details have been released at this stage on how the $500,000 balance is to be calculated and whether or not it will count back withdrawals and/or pension payments.
Other Key taxation points
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- A reduction in the company tax rate to 29% for incorporated small business. From 1st July 2012.
- The simplification of the calculation of an employee’s motor vehicle fringe benefit. The current four statutory rates will be replaced with a single flat rate of 20%. This effects new lease arrangements entered into after 10th May 2011.
- The ability to claim an immediate deduction of $5,000 for a motor vehicle purchased by a small business entity.
- Reduction in Higher Education Contribution Scheme (HECS) discounts from 1st January 2012. The discount for up-front payments will reduce from 20% to 10%, and the bonus on voluntary payments to the ATO of $500 or more will reduce from 10% to 5%.
