2012 Federal Budget Summary (Small Business, Self Funded Retirees and Tax Payers)

Monday, May 14, 2012 by Wakeful Partners | No Comments

On Tuesday 8th May 2012 the Federal Treasurer delivered the 2012 Federal Budget.  There are a number of announcements in this budget that will impact on small business owners, tax payers and families.  As such we outline for you a summary of some of the relevant proposals that we believe you should be aware of.

The budget has introduced some $32.5 billion in savings measures over the next 4 years and it is clear that a number of these measures will impact directly on you as a taxpayer.  Please note that these proposals need to successfully pass through Parliament before becoming law and thus maybe subject to further changes or amendments.

If you have any queries in relation to the summary notes below or any other matters then please don’t hesitate to contact our office.

2012 Federal Budget Summary (Small Business, Self Funded Retirees and Tax Payers)

Employers & Small Business

  • A $6,500 instant tax depreciation write off will be available to small businesses for the purchase of depreciable assets utilised for taxable purposes.  This measure will apply from 1st July 2012 to eligible small businesses with less than $2m in annual turnover.
  • Loss carry back provisions have now been proposed (for companies) for the 2012/2013 financial year.  A company will be allowed to carry back losses of up to $1m and receive a refund of previous years income tax payments.  This applies to tax losses and not capital losses.
    •  2013 losses can be offset for 1 year back against any tax paid in 2012
    • 2014 losses can be offset for 2 years back against any tax paid in 2012 or 2013.
  •  Company tax rate reduction proposed from 30% to 29% from 2013 has been abandoned.
  •  Employment termination payments (such as a golden handshake) that takes a person’s total annual taxable income, including the ETP, to no more than $180,000, they willcontinue to receive the ETP tax offset.  However, from 1 July 2012, if the payment of an affected ETP takes a person’s total annual taxable income, including the ETP, to more than $180,000, that amount of the ETP which exceeds this new whole-of-income cap will be taxed at marginal tax rates.

Taxation

  • Low income tax offset for minors (under 18) is still removed.  As such the ability to distribute income from a trust to minor beneficiary up to $3,333 tax free will now be reduced to $416.  Any distribution over $416 will be taxed a the top marginal tax rate.
  • Low income earners will remain exempt from paying the Medicare Levy where there income is less than the following;
    • Couples threshold increase to $32,743
    • Singles threshold increase to $19,404
    • Pensioners (below pension age) threshold increase to $30,451
  • Medical Expense rebate to be income tested and reduced for higher income tax earners.  (previously a rebate of 20% existed for a tax payer with any eligible medical expenses greater than $2,000).  From the 1st July 2012 singles with adjusted taxable income of more that $84,000 or couples with adjusted taxable income of more than $168,000 will only be entitled to a medical expense rebate of 10% when medical expenditure exceeds $5,000 per annum.
  • Marginal income tax rates changes will still proceed as previously proposed.

Current

2012-13

2015-16

 

Threshold ($)

Marginal Rate

Threshold ($)

Marginal Rate

Threshold ($)

Marginal Rate

1st rate

6,001

15%

18,201

19%

19,401

19%

2nd rate

37,001

30%

37,001

32.5%

37,001

33%

3rd rate

80,001

37%

80,001

37%

80,001

37%

4th rate

180,001

45%

180,001

45%

180,001

45%

Effective tax free threshold

16,000

20,542

20,979

Superannuation

  • Surcharge for high income earners.  Individuals whose adjusted taxable income is more than $300,000 will have their concessional superannuation contributions taxed in their superannuation funds at 30% (as opposed to the current 15% rate which is not means tested).
  • The flat 15 per cent tax on earnings within the superannuation fund and the tax exemption for assets supporting pension payments are to remain.

Income

Marginal tax rate (ignores Medicare levy)

Super contributions tax rate

Tax saving on concessional contributions

Under $18,200

0%

15% ( but will be refunded)

0%

$18,201 – $37,000

19%

15% ( but will be refunded)

19%

$37,001 – $80,000

32.5%

15%

17.5%

$80,001 – $180,000

37%

15%

22%

$180,000 – $300,000

45%

15%

30%

$300,000+

45%

30%

15%

  • Over 50’s concessional cap delay.  For the next two years commencing on 1 July 2012 the concessional cap (maximum amount you can contribute to superannuation and claim a tax deduction) will be $25,000 irrespective of a person’s age.
  • It was previously proposed that individuals over 50 years of age with superannuation balances under $500,000 would continue to be able to contribute up to the concessional cap of $50,000 per annum however this has now been deferred.  It is expected that the concessional cap of $55,000 will commence to be available in the year commencing 1 July 2014.
  • Individuals who salary sacrifice superannuation should review their salary sacrifice agreement to ensure that they do not exceed their concessional caps for the year commencing 1st July 2012.

Family Assistance Payments & Education Tax Rebate

  • Introduces a School kids Bonus as a cash payment to support the cost of their children’s education.  This replaces the Education Tax Rebate received via lodgement of income tax returns.
  • The following payments will be made in two equal instalments in January and July each year commencing in January 2013:
    • for each child in primary school — $410; and
    • for each child in high school — $820.
  • Eligible families will not be required to maintain receipts and invoices as proof of the  expenditure or wait until ‘tax time’.
  • Families will be eligible for the payment where they have children enrolled in and attending school and either:
    • are in receipt of the FTB Part A; or
    • have other qualifying income support payments or allowances.
  • For the 2011–12 income year, the Education Tax Rebate will be replaced by a one-off lump sum payment to eligible families in June 2012.

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