Last night Treasurer Swann handed down his budget highlighting the expected financial results of the Australian Economy for the 2011 financial year and to present the governments proposed changes to it's projects and revenue streams for the 2012 financial year.
Mr Swann has proposed to deliver the Australian Economy out of deficit by the 2013 financial year. Delivering the following results:
- 2011- a deficit in 2011 of $50bn
- 2012 - a deficit $22.6bn
- 2013 - surplus $3.5bn
So what effect does that have on me? Well, the Australian government funds the majority of its operations through direct tax collection from businesses and individuals just like you. Now, for the full Government release, please click the following link:
The Official 2011 Budget Documents
Alternatively, we've provided a simple list of the changes that we think effect our clients in the SME & Investment entity category and associated individual tax payers. So without further ado, please see below:
- Family Trusts and the distribution of passive income
- Review of Rebates, (Child Care Rebate in particular)
- Review of Negative Gearing on rental properties
- Review of company cards and FBT to try and reduce Australia's carbon footprint
- Government spending cuts & their tax implications
- Superannuation - Contributions, Pension Payments & Excess Contributions
Interactive’s selected budget updates
Family Trusts and the distribution of passive income
There was no clarification of the expected taxation of trust and linked entities (eg. Company beneficiaries). However, the government has made the change to the Low Income Tax Offset for minors to effectively reduce the eligible tax free amount of distribution to a minor to $416 in each Financial year from July 1, 2011.
Review of Tax Offsets (“rebates in the old language”)
- Removal of the Low Income Tax Offset for minors who earn passive income > $416 from July 1, 2011.
- Removal of the spouse rebate when your spouse is <40, is not working, without children and without disability.
Review of Negative Gearing
After much hype, there were no changes to negative gearing regime imposed by the government.
Review of FBT to reduce Australia’s carbon footprint
The government will phase in a flat rate for statutory method of FBT of 20% over the next 4 years on new contracts from 7.30pm 10th May, 2011. This has been reduced to discourage unnecessarily travelling more kilometres to achieve a tax benefit available with the current regime and provide a greener solution.
SME specific items
- The Entrepreneurs Tax Offset has been removed from 1.7.11
- The Depreciation on a new car in first year is increased by $5,000 in the first year accelerating the deduction. This additional benefit of $1,300 ($5k x ~30%) will not be realised until lodgement of your 2012 tax return.
- Super Guarantee Charge (9% standard super) will from 1 July 2011 will now present a personal liability for Directors of companies where the employees super contributions are not paid within 3 months of the due date (28 days after the quarter end) with no grace period provided at this time for payment.
- New rules for payslips – from 1 July 2012 employers will need to provide the total cash payments made to super on employee payslips.
- Company Tax Rate 29% - from 1 July 2012 for eligible small business entities (dependent on the country's financial results)
Superannuation
Superannuation Contribution thresholds for the 2012 financial year
- Concessional Super Contributions thresholds will remain at $25,000 for those taxpayers <50 years of age.
- Taxpayers >50 years of age will be able to contribute up to $50,000 in Concessional Super Contribution providing their member account balance (per member of Superfund) is under $500,000.
- The additional $25,000 for >50 will not be indexed, only the base for all taxpayers of $25,000 will be indexed at intervals of $5,000. At present, there has been no indexation of this amount.
Pension payment rules for 1 July, 2011 and outlook for FY13
Please read the points below in conjunction with the ATOs guidelines on minimum pension payments.
- There has been a increase in the minimum pension amount payable from 50% of the “normal” minimum pension payment to 75% of the “normal” minimum pension payment amount. This applies for the Financial Year commencing 1 July, 2011.
- For the Financial year commencing 1 July, 2012, the minimum pension payment amount will revert to the “normal” rates.
Excess Contributions Penalties – A “minor” relief
A new option will be provided to avoid excess concessional contributions tax, for an excess of up to $10,000, on a once-only basis from 1 July, 2011. <Concessional contribution caps<
Conclusion
After much media hype, there’s been a reasonably conservative budget delivered.
The major point of interest will be whether or not the government blows out proposed expenditure items with natural disasters (let’s hope we don’t have any more!) and whether or not we are able to ride the commodity boom to a surplus in 2013…….?
