INDIVIDUALS:
Schoolkids Bonus to replace Education Tax Offset
From 1 January 2013, families will receive the Schoolkids Bonus cash payment worth $410 for each child in primary school and $820 for each child in high school each year. The new automatic payment will replace the Education Tax Refund. The bonus will be automatic and upfront – parents won’t need to keep receipts and will receive the full amount automatically each time without paperwork. The Schoolkids Bonus will be available to families receiving Family Tax Benefit Part A plus young people in school receiving Youth Allowance and some other income support and veterans’ payments. As part of the transition to the new scheme the Education Tax Refund for 2011-12 will be paid out in full to all eligible families as a lump sum payment in June 2012 so parents will not have to worry about keeping receipts or making claims when they do their tax this year. The payment can be spent on anything and does not have to be related to education.
Dependant offsets to be consolidated
Various dependant tax offsets will be consolidated into a single, streamlined non-refundable offset from 1 July 2012. The new offset will only be available to taxpayers who maintain a dependant who is genuinely unable to work due to carer obligations or disability. The new consolidated offset will be based on the highest rate of the existing offsets it replaces, resulting in an increased entitlement for many. Taxpayers who are currently eligible to claim more than one offset amount in respect of multiple dependants will still be able to do so.
Medicare levy thresholds increased for 2011-12
From the 2011-12 income year, the Medicare levy low-income thresholds will be increased for singles to $19,404 (up from $18,839 for 2010-11) and to $32,743 for those who are members of a family (up from $31,789 for 2010-11). The additional amount of threshold for each dependent child or student will also be increased to $3,007 (up from $2,919). The Medicare levy low-income threshold for pensioners below Age Pension age will also be increased from 1 July 2011 to $30,451 (up from $30,439). This increase will ensure that pensioners below Age Pension age do not pay the Medicare levy while they do not have an income tax liability.
New income support supplement
The Government will provide a new supplement for eligible income support recipients to assist with cost of living pressures. The supplement will be an ongoing, non-taxable payment to recipients of Newstart Allowance, Sickness Allowance, Youth Allowance, Austudy, ABSTUDY, Special Benefit, Parenting Payment Single, Parenting Payment Partnered, Transitional Farm Family Payment and the Exceptional Circumstances Relief Payment. The new supplement will provide $210 per year for eligible singles and $175 per year for each member of an eligible couple.
Parenting payment eligibility
From 1 January 2013, the Government will align parenting payment eligibility for all recipients. Those recipients who were on payment prior to 1 July 2006 will be assessed under the same eligibility requirements as new recipients. Grandfathered recipients with a youngest child aged 6 years or over (for partnered recipients) or 8 years or over (for single recipients) will cease to be eligible for parenting payments and will transition onto Newstart Allowance (NSA) unless they move into employment. Parents who transition onto NSA will be eligible for the new more generous income test taper that will take effect from 1 January 2013 and which reduces NSA payments by 40 cents for every dollar of income earned above $62 per fortnight.
Changes to Family Tax Benefit Part A
The Government introduced a range of measures affecting the Family Tax Benefit Part A. From 1 January 2013, the Government will limit eligibility for FTB Part A to young people under 18 years of age or, where a young person remains in secondary school, the end of the calendar year in which they turn 19. From 1 July 2013, the Government will also increase the maximum payment rate of FTB Part A by $300 pa for families with one child and $600 pa for families with 2 or more children. For families receiving the base rate, the increase will be $100 pa for families with one child and $200 pa for families with 2 or more children. Changes have also been made regarding those travelling overseas and to streamlining income reporting processes for those no longer lodging tax returns due to the tripling of the tax free threshold.
Superannuation contributions tax to double for incomes above $300,000
From 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. The definition of ‘income’ for the purpose of this measure includes concessional superannuation contributions. The reduced tax concession will not apply to concessional contributions which exceed the concessional contributions cap of $25,000 and are therefore subject to excess contributions tax. Excess concessional contributions are effectively taxed at the individual’s top marginal tax rate and therefore do not receive a tax concession. The measure will apply from 1 July 2012. For the two years commencing 1 July 2012 the concessional cap will be $25,000 irrespective of a person’s age.
Means testing medical expenses offset
From 1 July 2012, the medical expenses tax offset will be means tested. For people with adjusted taxable income above the Medicare levy surcharge thresholds ($84,000 for singles, $168,000 for families in 2012-13) the threshold above which a taxpayer may claim the medical expenses offset will be increased to $5,000. In addition, the rate of reimbursement will be reduced to 10% for eligible out-of-pocket expenses. People with income below the surcharge threshold will be unaffected.
Non-resident tax rates to change from 1 July 2012
The Government announced that it will adjust the personal income tax rates and thresholds that apply to non- residents’ Australian income. From 1 July 2012, the first two marginal tax rate thresholds will be merged. The marginal rate for this threshold will align with the second marginal tax rate for residents (32.5%) and will apply to all taxable income below $80,000. This rate will rise again in June 2015 to 33%. In addition the CGT discount will not be available to non-residents on gains that accrue after 7.30pm on 8 May 2012.
BUSINESS:
Small business asset write-off and other measures
As already legislated, from 1 July 2012 small business entities will be able to write-off business assets costing less than $6,500 per asset. From 1 July 2012, small business entities will be able to write-off the first $5,000 of a new or used motor vehicle. Also in the Budget for small business was the confirmation of a federal small business commissioner that will be established with a budget of $2m. The details and terms of reference have not been announced though the Commissioner will represent and advocate small business interests to the government. Additionally, the Small Business Advisory Service will be made ongoing with additional funding of $28m over four years. This will fund service providers across Australia to assist small business through additional support and advisory services.
Living Away From Home Allowance (LAFHA) changes
The tax concession for LAFHA and benefits will be reformed by limiting access to the concession:
– to employees who maintain a home for their own use in Australia which they are living away from for work purposes; and
– for a maximum period of 12 months in respect of an individual employee for any particular work location.
Businesses to be allowed to carry-back losses
From 1 July 2012, companies will be able to carry back up to $1m worth of losses to get a refund of tax paid in the previous year. This will provide a cash benefit of up to $300,000 a year subject to available franking credits. From 1 July 2013, companies will be able to carry back up to $1m worth of losses against tax paid up to 2 years earlier. The Treasurer 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, which excludes two-thirds of small businesses from being able to benefit from the measure.
CUTS AND DEFERRALS:
The Government has decided not to proceed with the previously announced decision to reduce the company tax rate to 29%. The reason given being that the measure was unlikely to be passed by Parliament. The Government announced that it would not proceed with the 2010-11 Budget announcement to allow a standard tax deduction for work-related expenses and the cost of managing tax affairs (due to commence on 1 July 2013). The Government also announced that it will not proceed with the 2010-11 Budget measure of a 50% discount for interest income which was due to commence on 1 July 2013. The proposed higher concessional contributions cap for individuals aged 50 and over with low superannuation balances will be deferred from 1 July 2012 to 1 July 2014.
