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In the days that have passed sine the Federal Budget was delivered 10 May, we have reviewed the proposals and the various commentary material available to us. We present here a summary of the items we believe are particularly revelant to our clients.
It is important to remember that the items covered in this message are only proposals, and will only come into effect legislation has been enacted. We encourage you to contact us for specific advice as to what these changes mean for you.
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| Rebates for dependant spouses born on or after 1 July 1971 to be phased out. This is to encourage more Australians into paid employment. |
| Low Income Tax Offset (LITO) as of 1 July 2011 |
- Limiting entitlement of minor (under 18 years of age) to LITO on non-employment distributions
- This will impact unearned income such as dividends, interest, rent, royalties income from property and particularly to trust distributions to minors
- Family trust distributions to minors will now be far less tax-effective
- Minors with employment income will be able to retain access to the LITO.
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Discount on HECS as of 1 July 2011
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- Upfront HECS payment by students will see the discount reduced from 20% to 10%.
- Bonus volutary payment discounts to the ATO of $500 or more will be reduced from 10% to 5%.
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| Flood Levy as of 1 July 2011 |
- Individuals with a taxable income between $50,001 and $100,000 will pay a 0.5% levy on the portion of taxable income between $50,001 and $100,000.
- Individuals earning $100,001 and above will attract a further levy of 0.5%.
- Individuals are exempt from the flood levy is they were affected by a natural disaster during 2010-2011 and received an Australian Government Disaster Recovery payment.
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| Resident Individual Tax Rates as of 1 July 2011 |
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Tax Threshold levels with flood levy comparison
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Current levels, NOT subject to flood levy
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2011/12, subject to flood levy
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Taxable Income ($)
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Rate (%)
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Taxable Income ($)
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Rate (%)
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0 - 6,000
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0
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0 - 6,000
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0
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6,001 - 37,000
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15
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6,001 - 37,000
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15
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37,001 - 80,000
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30
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37,001 - 50,000
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30
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8,0001 - 180,000
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37
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50,001 - 80,000
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30.5
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18,0000+
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45
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80,001 - 100,000
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37.5
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100,001 - 180,000
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38
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180,000+
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46
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Note: Rates listed exclude Medicare levy.
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| Small Business Entities (turnover<$2m) as of 1 July 2012 |
- Small businesses will be given an instant tax write-off for the first $5,000 of any motor vehicle purchased from 2012/13.
Other initiatives to be introduced in 2012/13 include:
- An immediate write-off of all assist valued at under $5,000 (increased from the current amount of $1,000)
- A write-off of all other assets (excluding buildings ) in a single depreciation pool at a rate of 30%
- A reduction in the company tax rate to 29% for incorporated small businesses.
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| Entrepreneurs Tax Office as of 1 July 2012. |
| This will be abolished and replaced with the $5,000 tax write off for cars (as above). |
| PAYG Instalments as of 1 July 2011 |
| The rates used to calculate increased instalments will be reduced from 8% to 4%. |
| Employee payslips-Superannuation as of 1 July 2011 |
- Employees will be required to receive information on their payslips about the amounts of superannuation contributions paid into their nominated superannuation account
- Employers and employees will be required to receive quaterly notification from their superannuation fund if regular contribution cease
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| Fringe Benefits Tax as of 10 May 2011 |
Flat rate will be progressively introduced to replace the scale of statutory rates currently used to calculate the taxable value of a car fringe benefits under the "Statutory Formula" method. This will be completely phased in by 2014. The following table illustrates these changes:
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FBT statutory rate method
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Statutory rate (x cost of car to determine employee's car fringe benefit)
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Distance travelled during FBT year (1 April - 31 March)
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Existing contracts
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New contracts from 10 May 2011
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New contracts from 1 April 2012
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New contracts from 1 April 2013
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New contracts from 1 April 2014
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km
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%
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%
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%
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%
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%
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0 < 15,000
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26
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20
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20
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20
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20
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15,000 - 24,999
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20
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20
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20
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20
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20
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25,000 - 40,000
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11
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14
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17
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20
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20
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40,000+
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7
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10
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13
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17
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20
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| SMSF Annual Levy Increased as of 1 July 2011 |
| The annual ATO Supervisory Levy payable on lodgement of a Self-Managed Superannuation Fund Annual Return (i.e. income tax return for a fund) will be increased from $150 to $180 per year. |
| Excess Contribution Tax Relief as of 1 July 2011 |
Superannuation fund members who exceed their concessional contribution 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 members when refunded.
Limits:
- maximum amount which can be refunded is $10,000
- this measure does not apply to excess non-concessional contributions
- the measure will only apply to the first breach of the concessional contributions cap
- the $10,000 will not be indexed.
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| Concessional Contributions Cap for over 50s as of 1 July 2012 |
- The concessional contribution cap for those aged over 50 will be set at $25,000 more than the cap applying at those aged under 50. This measure will only apply to those with a superannuation balance of less than $500,000
- Thus when the under 50s cap increases to $30,000 ( indexing can only occur in multiples of $5,000), the over 50s cap will be $55,000.
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| Co-contribution freeze as of 1 July 2011 |
- There will be a continued freeze on the indexation applied on the income thresholds above which the maximum $1,000 superannuation co-contribution is no longer being paid
- $31,920 for full co-contribution and reducing to $61,920 for nil entitlement.
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| Pension Drawdown Relief as of 1 July 2011 |
- Pension drawdown relief applied to the minimum amount required to be drawn-down (i.e. paid to the member) in 2008/09, 2009/10 and 2010/11 years will be extended to 2011/12, although this reduction will now be 75% of what was the "normal" rate
- In the 2008/09, 2009/10 and 2010/11 years the reduction was to 50% of the "normal" rate
- This change applies to Account Based and Transition to Retirement pensions
- At this stage the reduction is being announced on a year-to-year basis and thus the "normal" rate is shown below as applying to the 2012/13 and future years
- For the pension types noted above there continues to be no maximum amount that can be drawn except, of course, for the limit being the member's fund balance.
These changes are illustrated in the following table:
Pension Drawdown Relief:
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Age
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2010/11
(50%)
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2011/12
(75%)
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2012/13+
(normal)
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55 - 64
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2%
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3%
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4%
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65 - 74
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3%
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4%
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5%
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75 - 79
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3%
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4%
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6%
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80 - 84
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4%
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5%
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7%
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85 - 89
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5%
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7%
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9%
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90 - 95
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6%
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8%
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11%
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95 & above
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7%
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11%
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14%
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| Superannuation information on employee payslips as of 1 July 2011 |
- Employees will be required to receive information on their payslips about the amounts of superannuation contributions paid into their nominated superannuation account
- Employers and employees will be required to receive quaterly notification from their superannuation fund if regular contributions cease.
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