Budget 2010 – Changes and Comments

By Jason Fittler

The key proposals announced in the Federal Budget include:

1. Individuals will only need to include 50% of interest income of up to $1,000 from certain investments in their tax return
2. Taxpayers will have the option to claim a standard deduction of $500 in 2012/13, increasing to $1,000 in 2013/14
3. The benchmark interest rate for capital protected products will retrospectively be the indicator rate plus 100 basis points
4. The maximum co-contribution matching rate and payment amount will remain at 100% and $1,000 respectively
5. Super funds will be eligible to claim a deduction when paying terminal medical condition benefits
6. The Commissioner will be able to exercise discretion in relation to excess contributions tax before an assessment is issued, and
7. Changes will be made to improve the accessibility of Special Disability Trusts.

Let’s take a closer look.

Taxation

1. 50% saving on declaring interest income up to $500. This in simple terms means if you earn over $1000 in interest income, you can deduct $500 from the total and only declare that amount. If you earn below $1000, halve the amount and declare that.
2. Standard tax Deduction, from 01/07/2012 you will be able to claim $500 worth of deductions against you taxable income whether you have them or not. As of 01/07/2013, this amount will increase to $1000. Keep in mind that this is still 2 years away before starting. No benefit will be gained until you complete the 2012/2013 return in July 2013.
3. Increase in Medicare Levy Low Income threshold for 01/07/2009, you will benefit from this straight away once you complete your 2009/2010 tax return.
4. Amendment to the Senior Australian Tax Offset rebate from 01/07/2010, this was some bookkeeping to tidy up this rebate.
5. Medical Expenses Off Set – increased to $2000 from 01/07/2010. You may want to hold of any medical procedures until after 01/07/2010.
6. Managed Investment Trusts – again tidying up some double taxation issues.

Superannuation

1. Co – Contribution – was $1500 now $1000, also taxable income threshold frozen at current levels.
2. Excess Contributions – tidy up the legislation to allow the commissioner to exercise discretion. This makes sense as mistakes can be made.
3. Increase in time limits for employers to make super contribution to former employees. This makes a lot of sense and will reduce admin costs for employers.
4. First Home Owners Savers Accounts – now the amount can be paid into your mortgage instead of your super. Again correcting a mistake in current legislation.

Social Security

1. Family Tax benefit – soften the laws in regards to receiving this payment. You still need to lodge your return unless you fall in one of the exemption categories. One of which is a hardship clause with I expect will cover most defaulters.
2. FTB part A – making this tougher to get for children between 16-20, they must now be in full time training.
3. Child Care Rebate – for 01/07/2010 will be capped at $7500 and will no longer be indexed.
4. Extended Special Disability Trust – form 01/01/2011 it will now include people who can work up to 7 hours per week.
5. Disability Support Pension – they will be tightening up on this pension in regards to the individual’s ability to work. Expect to see more claims rejected.

Henry Report

The government also confirmed a number of recommendations made in the Henry report as detailed below.

1. Increase the super guarantee from 9% to 12% starting on the 01/07/2013.
2. Raising the super guarantee for age 70 to 75.
3. Introducing a government contribution to super of up to $500 for low income earners.
4. Maintain concessional caps to super at $25,000 unless you are over 50 years old and have less then $500,000 in super then you have a concessional cap of $50,000.
5. Reducing standard company tax rate to 29% from 01/07/2013.
6. Reducing small business company tax rate to 28% from 01/07/2012.
7. Allowing small business immediate write off on assets valued less then $5000.

Mining Super Tax

This one still need to go through parliament as such I am not looking to closely at the detail, but will say that it has already had an effect on the market and I suspect will drive our larger miners off shore. Personally, I hope common sense prevails and this tax is dropped before it costs taxpayers money.

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