There were a number of announcements with both a positive and negative impact for clients. Some previously announced measures won’t proceed (lower company tax, 50% discount on interest income). The higher concessional caps have been ‘deferred’ until 2014 which means clients will need to start planning earlier for funding retirement.

 

Before any of these announcements can be implemented however, they will require the passage of legislation.

 

 

Superannuation
Date of effect: 1 July 2012 and 1 July 2014
The uncertainty around the concessional contribution (CC) cap for people aged 50 and over has been resolved in the short term. On 1 July 2012, the cap will halve from $50,000 to $25,000 for all super fund members aged 50 or over, regardless of their account balance.
The plan to allow those aged 50 or over to contribute up to $50,000 pa if they have less than $500,000 in super will be delayed until 1 July 2014. This is to give the Government time to work out the details regarding how they are going to monitor account balances and implement this measure.
Implications
Super fund members aged 50 or over should:
  • consider taking full advantage of the current cap by making concessional contributions of up to $50,000 before 30 June this year
  • review their concessional contributions, especially from 1 July, to make sure they don’t exceed the reduced cap
  • consider making non-concessional contributions if impacted by the cap reduction, and
  • review their contributions and income payments if using the ‘transition to retirement’ strategy.
Date of effect: 1 July 2012
As reported in the media before Budget night, the Government plans to increase the tax on concessional super contributions from 15% to 30% from 1 July 2012 for high-earners on more than $300,000.

While this has made employer super contributions (including salary sacrifice) less attractive for individuals who are required to pay 30% contributions tax, it’s still 15% less than the marginal tax rate of 45% they would otherwise pay on their salary.
Personal tax changes
Date of effect: 1 July 2012 and 1 July 2015
The personal taxation changes legislated as part of the Clean Energy (Carbon Tax Relief) Package will take effect on 1 July 2012 and on 1 July 2015, including:
  • changes to the marginal tax rates and thresholds for lower income levels.
These changes will mean modest tax savings for people earning under $80,000.
 
Date of effect: 1 July 2012
As originally intended, the Flood levy will cease on 30 June 2012. This means people earning over $50,000 pa will have more available money for the 2012/13 financial year and beyond.
Date of effect: 1 July 2012
Tax may increase on certain employment termination payments (ETP) such as golden handshakes.
People who know they are going to receive an ETP soon, may want to negotiate for the payment to be made before 30 June 2012.
The plan to allow taxpayers to claim a standard deduction for work-related expenses when completing their tax returns has been dropped, as has the proposed 50% discount for the first $500 of interest income.
Other taxation changes
Date of effect: 1 July 2012
The planned reduction in the company tax rate, from 1 July 2012 for small business and 1 July 2013 for other businesses, isn’t going ahead. This is a permanent measure and will be of particular concern to small business owners.
 
Date of effect: 1 July 2012
The Government confirmed that the 2011/12 minimum pension drawdown levels will continue.
 Implications
For pensioners who receive enough of a pension this is good news, as they won’t be required to draw more income than they need. As a result, they can keep more money in their pension account, and not be taxed on investment earnings. Also, they won’t be forced to sell investments that may have recently fallen in value to fund the additional income payments, and could keep more money invested to participate in any market recovery.
Date of effect: June 2012 and January 2013
A ‘SchoolKids Bonus’ of $820 a year for each child at high school and $410 for every child in primary school will automatically be paid to parents who are eligible for Family Tax Benefit Part A. This is to replace the Education Tax Refund which many eligible parents weren’t taking advantage of as they had to keep records of approved expenses and lodge a claim. The first payment is expected in June 2012.
Date of effect: 1 January 2013
The Government will limit the Family Tax Benefit Part A to young people under 18 years of age or where the young person remains in secondary school to the end of the year in which they turn 19. Currently Family Tax Benefit Part A can be paid for a child up to age 22. The young person may be able to receive Youth Allowance after this.
Date of effect: 1 July 2013
The rate of Family Tax Benefit Part A will increase by $300 pa for families with one child, and $600 pa for families with two or more children. The base rate of Family Tax Benefit Part A will increase by $100 pa for families with one child, and $200 pa for families with two or more children.
 
The Government confirmed its commitment to the landmark aged care changes announced on 20 April 2012.
Under the 'Living Longer Living Better' plan, the Government will:
  • overhaul the means-testing so care recipients with greater financial means make a greater contribution
  • make it easier for older Australians to stay in their home while they receive care
  • ensure more people will get to keep their family home and avoid the need for fire sales, and
  • establish a simplified gateway for accessing aged care information.
 More information?
For more information on what any of these changes may mean for you, please call BD Financial Planning on (02) 4367 6580.
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