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Below please find some out comes from the recent Budget announcement that we think might be of interest to you. If you would like to discuss any of these matters in more detail please do not hesitate to contact us. Personal Taxation Personal Income Tax Rates The Budget confirmed that previously legislated tax cuts will go ahead for the 2010 and 2011 financial years. The rates are as follows: 1 July 2009 – 30 June 2010:
1 July 2010 – 30 June 2011:
Private health insurance rebate The Government announced that high income earners will receive a reduction in their private health insurance rebate and face an increase in Medicare levy surcharge should they opt out of their health cover. From 1 July 2010, the Government will introduce three new ‘Private Health Insurance Tiers’ for high income earners:
Low and middle-income earners are not affected by the proposed changes. Foreign employment income The Government has announced changes to the tax treatment of foreign employment income. Under the proposed measures, foreign employment income will generally be taxable, but taxpayers will be entitled to a tax offset for foreign tax paid on the foreign employment income. The proposed measures will take effect from 1 July 2009 Employee share schemes The Government has announced that all discounts on shares and options provided under an employee share scheme, whether qualifying or non-qualifying, will be assessed in the income year in which they are acquired. That is, employees will no longer be able to elect to defer taxation on their discount to a later time. The Government will also limit access to the $1,000 upfront tax exemption to employees with an adjusted taxable income of less than $60,000. These measures will apply to shares and options acquired after 7.30 pm AEST on 12 May 2009. Medicare levy low-income thresholds The Government has released the Medicare levy low-income thresholds for the 2008/09 income year. The threshold will increase for singles to $17,794 and to $30,025 for individuals who are members of a family. The additional amount of threshold for each dependent child or student will also be increased to $2,757. The Medicare levy low-income threshold for pensioners below Age Pension age will also be increased from 1 July 2008 to $25,299. Seniors Supplement for self-funded retirees The Government will provide a Seniors Supplement from 20 September 2009. The Supplement will be available to self-funded retirees who are eligible for the Commonwealth Seniors Health Card or the Department of Veterans’ Affairs Gold Card with current Seniors Concession Allowance. It incorporates existing payments of Seniors Concession Allowance and the higher rate of Telephone Allowance. The Seniors Supplement will be $790.40 a year for singles and $1,190.80 a year for couples combined. Payments will be made quarterly. Paid Parental Leave Scheme: The Government announced it will introduce a paid parental leave scheme. The scheme will be funded by the Government and is intended to commence on 1 January 2011. Parents will be able to lodge claims from 1 October 2010. Payments under the scheme will be paid to the primary carer at the adult federal minimum wage (currently $543.78 per week) for a period of up to 18 weeks. Payments made under the paid parental leave scheme will be treated as taxable income and will affect entitlement to family assistance payments. Government funded paid parental leave can be taken in conjunction with, or in addition to, employer provided paid leave. Employers will make the paid parental leave payments for most employees. The Government will provide employers with funds in advance of the payments they make to employees. Business Taxation Small Business and General Business Tax Break As part of previously announced stimulus packages, small businesses (those with a turnover of less than $2million) were able to claim a bonus tax deduction for the acquisition of eligible depreciable assets, in addition to the usual depreciation claim. Initially set as a 10% bonus deduction, then in February lifted to 30%, the bonus has again been lifted last night to 50%. To be an eligible asset for this bonus, the asset must:
Businesses with turnover of greater than $2 million will still be eligible to claim 30% investment allowance on eligible assets. Assets and deemed dividend rules The Government will extend the deemed dividend rules to payments by way of a licence or right to use real property and chattels, such as cars, boats and real estate. This measure will reduce the opportunities for private companies to allow their shareholders or associates to use company assets for free, or at less than their arm’s length value, without paying tax. It is proposed this measure will apply from the 2009/10 income year. Use of non-commercial losses restricted The Government will tighten the application of the rules on the use of non-commercial losses to prevent high-income individuals from offsetting excess deductions from non-commercial business activities against salary and other income. From 1 July 2009, taxpayers with an adjusted taxable income of over $250,000 will only be able to deduct expenses from non-commercial business activities against the income from those activities. Any excess deductions will be quarantined to the business activity. Taxpayers will still be able to apply to the Commissioner for relief from the rules if there are exceptional circumstances, or because the nature of the activities means that a taxpayer is temporarily carrying on an uncommercial business but the activities they are undertaking are nonetheless independently assessed as commercially viable. Superannuation Measures Changes to concessional contributions cap The Government will cut the superannuation concessional contributions cap to $25,000 per annum (down from $50,000 per annum) from 1 July 2009. The transitional concessional contributions cap, which applies until the 2011/12 income year, for individuals aged 50 to 74, will be reduced to $50,000 per annum (down from $100,000 per annum). From 1 July 2012, the concessional contributions cap for those aged 50 and over will revert to the lower $25,000 cap (or applicable indexed amount at that time). The Government has not amended the non-concessional contributions cap. Superannuation co-contribution The Government has announced that it will temporarily reduce the superannuation government co-contribution matching rate that is payable on eligible personal superannuation contributions, with effect from 1 July 2009. The temporary matching rates as proposed are:
Reduction in pension drawdown The Government will extend its decision to reduce by 50% the minimum annual payment amounts for account-based pensions for the 2009/10 income year. That is, self-funded retirees will only have to draw down half of the minimum amounts from their account-based pensions for 2009/10. Other Measures Increase in ASIC fees In the 2009/10 Federal Budget, the Government stated that it will index fees and charges collected by the Australian Securities and Investments Commission (ASIC) to the Consumer Price Index from the 2010/11 income year. |