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On 8 May 2012, the Treasurer, Mr Wayne Swan handed down his fifth Federal Budget. A fiscally tight Budget designed to return the Budget to surplus, it contained anticipated tax changes, but also had a raft of other tax measures some of which may not be welcomed by businesses, nor indeed non-residents, including significant changes to the tax loss measures.
In addition the Government decided to scrap a number of the previously announced measures including the standard tax deduction and the interest discount.
We encourage you to contact your Walker Wayland advisor if you wish to discuss any aspects of the Budget further.
Individual and family taxation
The government will not proceed with:
the standard deduction for work-related expenses; or
the 50% tax discount for interest income.
The Medicare levy low income thresholds will be increased to $19,404 for individuals and $32,743 for families for the 2012/13 income year.
A means test will be introduced for the net medical expenses tax offset from 1 July 2012.
The education expenses tax offset will be replaced with a new Schoolkids Bonus from 1 January 2013.
From 1 July 2012, the eight dependency tax offsets will be consolidated into a single, streamlined and non-refundable offset.
From 1 July 2012, the mature age worker tax offset (MAWTO) will be phased out for taxpayers born on or after 1 July 1957.
Exemptions for the temporary flood and cyclone reconstruction levy will be extended to individuals who were eligible for an Australian Government Disaster Recovery Payment in 2010/11 as well as certain individuals affected by a natural disaster in 2011/12.
From 1 July 2012, the marginal tax rate for non-resident individuals participating in the Seasonal Labour Mobility Program will be reduced to 15%.
the proposed measure to lower the company tax rate from 2013/14 and from 2012/13 for small businesses; or
the Tax Breaks for Green Buildings program.
Companies will be allowed to carry back up to $1m of tax losses in 2012/13 to offset against tax paid in 2011/12. From 2013/14, tax losses can be carried back and offset against tax paid up to two years earlier.
The write off of bad debts owing from related parties will not be deductible effective from 7:30pm (AEST) 8 May 2012.
The tax concession for LAFHA and benefits will be limited to employees living away from a home maintained in Australia and will only be available for a maximum period of 12 months in respect of an individual for any particular work location.
From 8 May 2012, limited recourse debt will include arrangements where the creditor’s right to recover the debt is effectively limited to the financed asset or security provided.
Certain Tier 2 capital instruments issued by ADIs can be treated as debt for income tax purposes on commencement of the Basel III capital reforms on 1 January 2013.
The taxable value of airline transport fringe benefits will be updated from the stand-by value to the market value for benefits provided after 7:30pm (AEST) on 8 May 2012.
The Clean Energy Finance Corporation will be exempt from income tax effective from 1 July 2013.
From 1 July 2012, individuals with income greater than $300,000 will have the tax concession on their contributions reduced from 30% to 15% (excluding the Medicare levy).
There will be a two-year deferral of the start date of the previously announced (2010/11 Budget) measure increasing concessional contribution caps for individuals over 50 with low superannuation balances. This will be deferred from 1 July 2012 to 1 July 2014.
From 1 July 2012, the employment termination payment (ETP) tax offset will be limited. As a result only that part of an affected ETP, such as a golden handshake, that takes a person’s total annual taxable income (including the ETP) to no more than $180,000 will receive the ETP tax offset.
Minor changes affecting cross border transactions will include a clarification of the definition of permanent establishment for GST purposes.
The operation of the GST law in relation to the mortgage lending sector will be clarified to reduce compliance costs.
From 1 July 2012, access to reduced input tax credits (RITC) will be restored for credit unions who rebrand as “banks”.
Health supplies by a health care provider paid for by a statutory compensation scheme operator will be GST-free if the underlying supply from the health care provider to the individual is also GST-free.