A new Schoolkids Bonus for Australian families
The Government will transform the current Tax Education Refund into a Schoolkids Bonus paid through the family payments system to provide timely assistance to families.
The Schoolkids Bonus will guarantee eligible parents $410 for primary school students and $820 for secondary school students and will be paid in equal instalments at the start of the school semesters in January and July each year commencing from January 2013.
As a result of this reform, families won’t have to wait until tax time to claim the bonus and risk losing receipts by then and thus missing out on any payments.
As a transitional arrangement, the full Education Tax Refund for the 2011/2012 year will be paid in June 2012, recognising that families have already incurred bills for this school year.
Loss carry-back scheme
From 1 July 2012, the Government will provide further tax relief for companies that report a loss through the introduction of a loss carry-back, which will benefit 110,000 companies.
Under current measures a business that makes a loss can carry forward losses to future tax years to offset against future profits and therefore reduce their tax bills.
From 2012/2013 companies that incur a loss will be able to carry back losses so that they get a refund against tax previously paid in a prior year. Companies will be able to carry back up to $1 million worth of losses to get a tax refund against tax paid up to two years earlier.
Helping small businesses in our patchwork economy
From 1 July 2012, small businesses will be able to write-off any new business asset costing less than $6,500, for as many assets as they purchase. This is an increase from $1,000 under the old arrangements. This means that a business that purchases four items of equipment worth $6,000 each will be able to get a tax deduction of $24,000 in the first year rather than $3,600. This will result in a small business paying $6,120 less tax.
Assets costing $6,500 or more can be depreciated in a single pool from 2012/2013 at 15% for the first year they are purchased and then 30% in each subsequent year.
Small business will be able to instantly write off the first $5,000 of a motor vehicle from 1 July 2012.
A landmark tax reform – tripling the tax-free threshold
From 1 July 2012, the Government will triple the tax free threshold to $18,200.
This critical tax reform will mean up to one million people will no longer have to lodge a tax return and around 630,000 additional people will no longer have to pay any tax.
Living away from home allowance and benefits
The Government will be reforming the tax concessions currently available for living away allowances to ensure that only people legitimately maintaining a home away from their actual home for an initial period.
The measure will limit access to the tax concession to employees who are maintaining a home for their own use in Australia that they are living away from for work and imposing a 12 month time limit on how long an employee can receive the tax concession at a particular work location.
These reforms will stop businesses from being able to give a very large taxpayer funded tax break to employees who aren’t maintaining a second home, or are maintaining two homes indefinitely.
The measure will not affect the tax concession for “fly in fly out” arrangements, as these employees will not be subject to the 12 month time limit.
It will also not affect the tax treatment of travel and meal allowances which are provided to employees who have to travel from their usual place of work for short periods generally up to 21 days.
The reforms will apply from 1 July 2012 for arrangements entered into after 7.30pm (AEST) on 8 May 2012 and from 1 July 2014 for arrangements entered prior to that time.
Better targeting tax breaks for “golden handshakes”
Golden handshakes are among a large class of payments known as employment termination payments (ETPs).
Currently ETPs are taxed at 15% for those over preservation age and 30% for those under preservation age up to an indexed cap of $165,000. The very design of this concession means that low income earners cannot benefit from it and is most beneficial to high income earners receiving large payouts.
From 1 July 2012, only that part of an affected ETP, that take a person’s total annual taxable income (including the ETP) to no more than $180,000 will receive the ETP tax offset. Amounts above this cap will be taxed at marginal rates.
The reform will keep existing concession for payments related to hardship, namely redundancy payments, compensation for employment related disputes and payments for invalidity or death.
Mature age worker offset
From 1 July 2012 the Government will phase out the mature age worker offset for taxpayers born on or after 1 July 1957. This will not affect any person who currently receives the offset.
To help those older Australians who wish to continue work but face barriers in getting a job, the Government will provide a Jobs Bonus of $1,000 to 10,000 employers who recruit and retain a worker aged 50 or more for three months or more.
Non-resident taxpayers – personal income tax rates and capital gains tax discount
From 1 July 2012, the Government will adjust the personal income tax rates and thresholds that apply to non-residents Australian income to align them with the rates and thresholds that apply to residents.
The Government will remove the 50% discount on Capital gains earned after budget night by non-residents on taxable Australian property, such as real estate and mining assets. Non-residents will still be entitled to a discount on capital gains accrued prior to Budget night after offsetting any capital losses, provided they choose to value the asset as at that time.
Managed Investment Trusts
The Government will return the withholding tax rate to 15% from its current 30%.
Net Medical Expenses Tax Offset
From 1 July 2012 the Government will means test the expenditure on net medical expenses. For those people with adjusted taxable income above the Medicare Levy Surcharge threshold of $84,000 for singles and $168,000 for couples and families in 2012/2013, the claim threshold will be increased to $5,000 and the rate of reimbursement reduced to 10%. Taxpayers with income below the MLS threshold will continue to receive the same assistance as currently.
Replacement of the Entrepreneurs Tax offset
From 1 July 2012, the Entrepreneurs Tax offset will be abolished to fund the $5,000 tax break for Motor Vehicle purchases.
Assisting Workers with families
The Government is helping to ensure child care is more accessible by assisting parents to participate in the workforce, study, training or job search activities by increasing the child care rebate from 30% to 50% of out of pocket expenses up to a maximum of $7,500 per year for each child.
Dependent Spouse Tax Offset (DSTO)
The Government will be phasing out the Dependent Spouse Tax Offset (DSTO). The DSTO dates back to a time when there was only one breadwinner even if there were without caring responsibilities or a disability. The DSTO effectively means that spouses without children received $2,355 to stay at home. For this reason the Government is phasing out the DSTO for spouses aged less than 60 years old from 1 July 2012.
By 1 July 2017, nobody with a dependent spouse under Age Pension will have access to the DSTO, this is an important milestone for the Government reversing the trend of the past twenty years.
Measures not being proceeded with
Given that the Government will be tripling the tax free threshold from 1 July this year, the Government has decided not to proceed with the standard deduction for work related expenses.
Tax payers with genuine work related expenses will still be able to claim tax deductions.
The 50% discount on interest earned will also not take place; this is due to Australians saving more since the Government had announced this measure 12 months ago. The Government’s public consultation process has made it clear that the tax discount for interest will be difficult to implement and may not have a significant impact on savings behaviour.
Minerals Resource Rent Tax
From 1 July 2012, the Government will introduce the Minerals Resource Rent Tax (MRRT) to capture a better return for our non-renewable resources.
Company Tax cut
The Government will not be proceeding with the lowering of the company tax rate.
GST backdating limit
As part of the introduction of the self-assessment for indirect taxes, the Government has amended the GST law to limit the Commissioner of Taxation ability to backdate a taxpayers GST registration to four years with effect from 1 July 2012.
Medicare Levy low income thresholds
The Medicare Levy threshold will increase to $19,404 for individuals and $32,743 for families with effect from 1 July 2011.
More Superannuation for workers
The Superannuation Guarantee will be progressively increased from 9% to 12% from 1 July 2013 to 1 July 2019.
The maximum age limit for the Superannuation guarantee will be abolished to increase incentives for workers aged 70 and over to remain in the workforce and further boost retirement savings.
Supporting low income Australians
Workers earning up to $37,000 will get a boost of up to $500 to their Superannuation savings from 1 July 2012.
Fairer access to Superannuation concessions
From 1 July 2012, individuals with income greater than $300,000 will have the tax concessions on their contributions cut from 30% to 15% (excluding the Medicare Levy).
Superannuation Concessional Contributions Cap
Commencing from 1 July 2014, individuals aged 50 and over with Superannuation balances below $500,000 will be able to make up to $25,000 more in concessional contributions than allowed under current concessional contributions.