TAX NEWS | VIEWS | CLUESWelcome to the Federal Budget edition of the Spry Roughley Report The 2012 Federal Budget - a very political construct Not much good news for business and investments, the Government seems intent on funnelling money to lower income groups to help boost spending and perhaps shore up their electoral standing. In addition to the high level summary which follows, there are some less mentioned elements that seem to have been overlooked by commentators that will be of interest: 1. Limit on ETP tax offset for "golden handshakes". From 1 July 2012, if the "golden handshake" part of an ETP takes a taxpayer's total taxable income above $180,000, then the excess will be taxed at 46.5% This will not affect genuine redundancy ETP's. 2. Mature age worker tax affect to be phased out from 1 July 2012 for people born on or after 1 July 1957 (ie under 55 years of age at 1 July 2012). 3. Means testing for the medical expenses offset from 1 July 2012, for people with adjusted taxable incomes above the Medicare Levy Surcharge thresholds ($84,000 for singles and $168,000 for couples or families in 2012-13). The threshold is increased for these taxpayers from $2,000 to $5,000, and the rate of reimbursement is reduced from 20% to 10%. There is no change for people below the income thresholds. 4. LAFHA changes announced. Living away from home allowances (LAFHA) will be limited to employees who maintain a home for their own use in Australia, who are living away from that home for work. The LAFHA tax concession is also to be limited to a period of 12 months for an individual employee for any particular work location. These changes do not affect arrangements entered into prior to 8 May 2012 until 1 July 2014 - ie: there is time before these existing arrangements will be impacted. It is also noted that these changes will not affect "fly in - fly out" arrangements. 5. Managed Investment Trusts will have the withholding tax rate on their distributions to non-residents returned to the 15% rate (back from 7.5% that applied previously). 6. Green Buildings Program. The Government announced it will not proceed with the tax breaks for the Green Buildings program that was part of the 2010 election promises. Initially this was due to commence on 1 July 2011, but was deferred previously to 1 July 2012. This was a scheme to provide one off tax deductions for 50% of the capital expenditure to improve energy efficiency in buildings. 7. Removal of the 50% CGT discount for non-residents on capital gains that accrue after 8 May 2012; however the gains accrued to that date will remain eligible for the discount. 8. 30% tax on concessional superannuation contributions for high income earners applies from 1 July 2012. The high income test is the taxable income plus concessional superannuation contributions, adjusted fringe benefits, total net investment losses, tax free government pensions, and other special items that would be uncommon for most taxpayers. This measure does not apply to concessional contributions that exceed the contribution cap as they are already effectively taxed at 46.5%. 9. Parenting payment eligibility to be aligned for all recipients from 1 January 2013 for those who were on payment before 1 July 2006, who will transition onto Newstart Allowance unless they move into employment. 10. Significant increase in Australian Financial Services (ASF) Licence fees - for companies to $1,485 and for a natural person $825, and increased annual lodgement fees. 11. Heavy vehicle road user charges to increase from 23.1 to 25.5 cents per litre for registered vehicles with a gross mass of more than 4.5 tonnes, used on public roads for business. This apparently will reduce the fuel tax credit paid by the Government to heavy vehicle operators. 12. Non-resident tax thresholds will rise in line with resident rates for 2013 to 2015, although the first step in the rates for non-residents is $0-$80,000 - taxed at 32.5% for 2013 and 2014, and at 32% for 2015 and later years. Click on the links below or scroll down for further summary of the Federal Budget.
As usual, please do not hesitate to call us on (02) 9891 6100 should you wish to discuss how any of the points raised in the report specifically affect you, or click here to send us an email. Warm regards, Martin __________________________________________________________________________ |
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Personal Tax Rates – ResidentsThe Government did not make any changes to the currently legislated tax rates for residents that are to apply from 1 July 2012:
The personal income tax rates and thresholds are summarised for resident taxpayers in the tables below:
Work-related Expenses Standard Deduction DroppedThe Government announced that it will not proceed with the 2010–2011 Budget announcement to allow a standard tax deduction for work-related expenses and the cost of managing tax affairs which was due to commence on 1 July 2013. The Government is pursuing other simplification measures such as tripling the tax-free threshold to $18,200 from 1 July 2012. Interest Income Discount Not to ProceedThe Government announced that it will not proceed with the 2010–2011 Budget announcement for a 50% discount for interest income which was due to commence on 1 July 2013. The Government said its public consultation process involving key sector groups, industry participants and consumer groups “revealed concerns with the complexity involved in calculating the discount and its overall effectiveness”. Schoolkids BonusIn the lead-up to the Budget, the Prime Minister announced that the Government will make a new, no-strings cash payment, called the Schoolkids Bonus, to certain families with children at school. It will replace the current Education Tax Refund and will apply from 1 January 2013. Each year, families will receive the Schoolkids Bonus worth:
The Government said the payment will be “automatic and upfront”, which means eligible parents will not need to keep receipts. Flood Levy – Further ExemptionsThe Treasurer confirmed in the Budget that people who suffered flood damage in 2012 will also be made exempt from the flood and cyclone levy that applies for the 2011–2012 financial year only. He said that earlier this year, more flooding devastated parts of western Queensland and northern New South Wales. Company Tax Cut Proposal ShelvedThe Treasurer announced that the proposed reduction in the company tax rate to 29% will not proceed. The reason given by the Treasurer was that it had become clear that the proposed tax rate cut would not be approved by Parliament. The Treasurer added that the savings from not proceeding with the company tax cut will be used to fund other measures, including the loss carry-back arrangement for companies. Tax Loss Carry-back Regime ConfirmedThe Treasurer confirmed the Government will allow businesses to carry-back losses. Mr Swan said the proposed changes would “allow businesses to ‘carry back’ their losses, to offset past profits and get a refund of tax previously paid on that profit”. The carry-back will be available to companies and entities that are taxed like companies. As part of the loss carry-back, from 1 July 2012 companies will be able to carry back up to $1 million worth of losses to get a refund of tax paid in the previous year. From 1 July 2013, companies will be able to carry back up to $1m worth of losses against tax paid up to two years earlier. According to the Government, in its first four years the regime “is estimated to provide much-needed assistance to nearly 110,000 companies”. Super Contributions Tax ChangesFrom 1 July 2012, individuals with income greater than $300,000 will have the tax concession on their concessional contributions reduced from 30% to 15% (excluding the Medicare levy). This means that the tax rate on concessional contributions will effectively double from 15% to 30% for very high income earners from 1 July 2012. Currently, the 15% flat tax on concessional contributions (paid by the receiving superannuation fund) provides high income earners with a significantly larger tax concession than those on lower marginal tax rates. The Minister for Financial Services and Superannuation, Bill Shorten, said a small number of people on high incomes are getting a better tax deal out of super than millions on average incomes.
The proposed reduction in the higher tax concession that is currently available for very high income earners on their concessional contributions will align it more closely with the concession received by average income earners, Mr Shorten said. However, there will still be an effective tax concession of 15% (up to the concessional contributions cap of $25,000) for these high income earners. Contributions Cap for over 50sThe proposed higher concessional contributions cap for individuals aged 50 and over with superannuation balances below $500,000 will be deferred from 1 July 2012 to 1 July 2014. Accordingly, all taxpayers, regardless of age, will be subject to a concessional contributions cap of $25,000 for the 2012–2013 and 2013–2014 income years. In 2014–2015, the general cap is expected to increase to $30,000 through indexation, and the higher cap would then commence at $55,000 for eligible taxpayers aged 50 and over. Funding to Target Tax DebtsThe Government announced that it will provide $106 million over four years to the ATO to improve the management of outstanding taxation debts and superannuation guarantee charge. The Government said the funding is designed “to allow the ATO to support a greater range of taxpayers in meeting their reporting and payment obligations through contacting them earlier and by providing more targeted assistance”. GST Compliance ProgramThe Government is to provide $193.3 million to the ATO in 2014–2015 and 2015–2016 to continue to promote voluntary GST compliance. This extends a 2010–2011 Budget measure by two years. The funding will be directed at detecting fraudulent GST refunds, systematic under-reporting of GST liabilities, failure to lodge GST returns and outstanding GST debts. This is not advice. Clients should not act solely on the basis of the material contained in this newsletter. Items herein are general comments only and do not constitute or convey advice per se. Also, changes in legislation may occur quickly. We therefore recommend that our formal advice be sought before acting in any of the areas. The Spry Roughley Report is issued as a helpful guide to clients and for their private information. Therefore it should be regarded as confidential and not be made available to any person without our prior approval. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
