Mid-Year Federal Budget Update
The Federal Government have announced that there is a $37 billion hole in the budget this year, due to external influences and Treasurer Wayne Swan has announced some new measures that will help to fill the coffers and tune up some of the issues in the May Budget.
Superannuation
Extension of Drawdown Relief
In the recent budget the government announced that the drawdown relief was going to be phased out by 1 July 2012. However the government has extended the relief for the 2012/13 tax year.
Low Income Super Contribution
Starts 1 July 2012
Tax payers with adjusted taxable incomes of less than $37,000 will receive a low income super contribution (LISC) of up to $500. There will be no requirement to lodge a tax return, as the ATO will use existing information to determine an individual’s income. Only individuals who receive at least 10% of their income from employment or business income will be eligible. The maximum is $500 and the minimum $20 is based on 15% of concessional contributions.
Super Co-contribution
Starts 1 July 2012
The government matching of the super contributions will be changed with the amount being reduced to $500 which matches the introduction of the LISC. The rate remains $ for $ but the cut off reduces from $61,920 to $46,920.
Abolition of Age Limit for Super Guarantee (SG)
Starts 1 July 2013
Employers will be required to pay SG contributions for eligible employees aged 70 or older. The existing exemption of earning less than $450 per month still applies.
Super Trust Deed
Starts Immediately
The government will amend legislation ensuring super trust deeds cannot avoid exceeding the contributions caps. Some deeds are written that the contribution, if breaching a cap, will not be accepted and the legislation will stop this practice.
Pause of Concessional Contribution
The concessional cap of currently $25,000 will not be indexed in the 2013/14 year. It is expected it will be increased in the 2014/15 year to increase to $30,000. This also means that the indexation pause will also be for non-concessional contributions as they are 6 times the concessional level.
Taxation
Fringe Benefits Tax
Starts 1 July 2012
Access to the tax exemption for temporary residents will only be allowed if the person maintains a residence for their own use in Australia and are living away due to work.
Any additional expenditure over food and and accommodation will need to be substantiated.
Dependant Spouse Tax Offset
Starts 1 July 2012
The government will phase out the dependant spouse tax offset (STO) for tax payers with a spouse born on or after 1 July 1952. (It was originally for a spouse born after 1 July 1971. There will be exemptions to this ruling.
Deferral of Tax Reforms
Originally the $500pa of work related expenses will be deferred for a year and the $1,000 pa of work related expenses will be delayed until 1 July 2014.
The 50% discount for interest income will also be delayed until 1 July 2013, with further consultation taking place in the meantime.
The commencement of interest withholding tax for financial institutions will be deferred until 2014/15.
Car Fringe Benefits
Employers can now elect whether to take the new 20% flat rate fringe benefit on cars bought after 10 May 2011, or stay with the transitional rules. The employer must seek the employees permission if the employee would be worse off from the election.
Social Security
Baby Bonus Indexation
Starts 1 July 2012
The government will freeze the indexation of the bonus for 3 years and the payment will be re-set at $5,000 per child from 1 September 2012.
Family Tax Benefit Part A(FTB Part A)
Starts 1 July 2012
The government will make the payment of FTB Part A conditional on the children being immunised with vaccines for meningococcal C, pneumococcal and chicken pox.
From July 2012 these arrangement will replace the Maternity Immunisation Allowance.
The government will also case fortnightly payments to tax payers who are found to have no entitlements to FTB for 2 consecutive years following their tax return.
If someone is still entitled they can make a lump sum claim at the end of the financial year.