On 10 May 2011, the Treasurer Mr Swan handed down his fourth budget, the 2011-12 Federal Budget that is focused on getting back to surplus by 2012-13 and getting more people into jobs while addressing a number of tax system shortcomings and revenue leakages from the government’s coffers.
There were therefore a raft of tax changes announced covering specific areas such as superannuation, income tax, CGT, GST, FBT and charities.
Further details on the Budget announcements can be found through the links to our website in this email and we would encourage you to contact your Walker Wayland advisor to discuss issues that will impact your business.
The key takeaways for our client’s in relation to the budget announcements are detailed below:
Individual and family taxation
The rebate for dependent spouses aged less than 40 will be phased out.
The low income tax offset that is delivered through regular pay during the year will be increased from 50% to 70% of their total entitlements to increase take home pay.
The ability of minors to access the low income tax offset to reduce tax payable on their unearned income, such as dividends, interest and rent, will be removed, with effect from 1 July 2011.
From 1 July 2011, self-education expenses will no longer be deductible against all government assistance payments.
From 1 January 2012, the discount available to students electing to pay their HECS student contribution up-front will be reduced from 20% to 10%, and the discount on voluntary payments to the Tax Office of $500 or more will be reduced from 10% to 5%.
From 1 July 2011, families in receipt of Family Tax Benefit Part A will be eligible for an advance of up to 7.5%, up to a maximum of $1,000, of their annual Family Tax Benefit Part A entitlement.
Indexation of the Family Tax Benefit (FTB) Part A and B supplements will be suspended for 3 years. Indexation of family payment higher income thresholds and limits will also be paused at their current level until 1 July 2014 (rather than being CPI-indexed).
From 1 January 2012, the eligibility for Family Tax Benefit Part A will be limited to children up to the age of 21 years.
The company loss recoupment rules are to be amended to make it easier for companies to satisfy the continuity of ownership tests.
Small Business & CGT
The rules governing access to the small business CGT concessions will be tightened for trusts and broadened for some small businesses.
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.
A transition to a flat rate of 20% will replace the scale of statutory rates currently used to calculate the taxable value of a car fringe benefit under the “statutory formula” method.
The government has announced a range of reforms to the not-for-profit (NFP) sector, including a statutory definition of “charity”, a new Charities and Not-for-profits Commissioner and reforms to ensure that the concessions are targeted only at those activities that directly further a NFP’s altruistic purpose.
The GDP adjustment factor for PAYG instalment taxpayers who use the GDP adjustment method will be reduced from 8% (which is the rate that would apply for the 2011/12 income year under the current law) to 4% for the 2011/12 income year.
Various measures to improve tax compliance will be introduced including increasing company directors’ personal liabilities for company debts and increasing Tax Office resources.
Eligible individuals will have the option of having excess concessional superannuation contributions assessed as income at their marginal rate of tax, rather than incurring excess contributions tax.
A higher concessional contributions cap will apply for the over 50s with superannuation balances under $500,000 from 1 July 2012.
Superannuation fund trustees will be able to make greater use of tax file numbers to locate member accounts.
Employees will receive information on their payslips about the amount of superannuation paid into their accounts.
Superannuation funds will no longer be able to treat certain assets as trading stock.
The pension drawdown relief that has been provided over the last three years will be phased out.
The freeze to the indexation of the income threshold for superannuation co-contribution purposes will be extended for an additional year to 2012/13.
Certain trusts and partnerships keeping accounts in foreign currency can calculate net income using that currency.