D P Loewy & Co. Budget Report Summary

D P Loewy & Co. Budget Report Summary

1. PERSONAL TAXATION

Personal tax rates – no change (but be careful of flood levy)

The Government did not make any changes to the currently legislated tax rates which apply for the 2010-11 and following years (not forgetting that, from 1 July 2011 for one year, those rates will include flood levy, where applicable.)

Flood Levy

By virtue of levy for the 2011-12 financial year, the effective top personal marginal tax rate will be 47.5% including flood levy and the Medicare levy.

With the change (usually reduction) in tax rates that has taken place over recent years, traditional year-end tax planning has suggested that taxpayers, where possible, defer income and bring forward deductions. But this year, the reverse applies – although it is acknowledged that the increase in tax rates will be only small.

2. INDIVIDUALS AND FAMILIES

i) Dependent spouse rebate to be phased-out

The dependent spouse rebate will be phased out for taxpayers with a dependent spouse aged less than 40.

ii) Minors and low income tax offset

The government will limit the ability of minors (children under 18 years of age) to access the low income tax offset to reduce tax payable on their unearned income such as dividends, interest, rent, royalties and other income from property, with effect from 1 July 2011

3. CGT

i) Small business GST concessions amendments

The Government will amend the small business tax concessions so that trusts will not be able to avoid being treated as connected entities for the purpose of testing eligibility for the concessions on the basis that the trusts own assets for their own benefit.

ii) Scrip for scrip rollover

The Government will amend the scrip for scrip roll-over integrity provisions that currently apply to individuals and companies to ensure they also apply to trusts, superannuation funds and life insurance companies, with effect for GST events happening after 7:30pm (AEST) on 10 May 2011.

4. FBT

i) Statutory formula reforms for car fringe benefits

The existing statutory fractions ranging from 7% to 26% applied when working out the taxable value of a car fringe benefit using the “statutory formula” method will be phased out and replaced by a single statutory rate of 20%.

5. SUPERANNUATION

i) Refund of excess concessional contributions

Eligible individuals who breach the concessional contribution cap by up to $10,000 will be provided with the option of having these excess contributions taken out of their superannuation fund and assessed as income at their marginal rate of tax, rather than incurring excess contributions tax. This refund option will only apply to first time breaches from 1 July 2011.

ii) Higher superannuation contribution caps for over 50s

The Government has proposed to allow individuals aged 50 and over with total superannuation balances of less then $500,000 to contribute, $25,000 above the general concessional cap ($25,000) from 1 July 2012.

iii) Reduction in minimum pension drawdowns for 2011/12

The Government will phase out the 50% pension drawdown relief that has been provided over the last three years. Minimum payment amounts for account based, allocated and market linked (term allocated) pensions will be reduced by 25% for 2011/12 and will return to normal in 2012/13.

6. GST

i) Access to GST instalment system for small business in net refund position

The current GST instalment system will be extended to allow access for small businesses that are in net refund position.

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