Welcome to the Davenports Client Alert Special Edition – Budget 2012
Personal Tax Rates – Residents
The Government did not make any changes to the currently legislated tax rates for residents that are to apply from 1 July 2012:
- from 1 July 2012, the tax-free threshold will be increased to $18,200 and the first two marginal tax rates will be increased from 15% to 19% and from 30% to 32.5%, respectively; and
- from 1 July 2015, the tax-free threshold will be $19,400 and the second marginal tax rate will be increased from 32.5% to 33%.
The personal income tax rates and thresholds are summarised for resident taxpayers in the tables below:
|2011–2012 personal tax rates and thresholds|
|2012–2013 personal tax rates and thresholds|
|2015–2016 personal tax rates and thresholds|
Work-related Expenses Standard Deduction Dropped
The Government announced that it will not proceed with the 2010–2011 Budget announcement to allow a standard tax deduction for work-related expenses and the cost of managing tax affairs which was due to commence on 1 July 2013. The Government is pursuing other simplification measures such as tripling the tax-free threshold to $18,200 from 1 July 2012.
Interest Income Discount Not to Proceed
The Government announced that it will not proceed with the 2010–2011 Budget announcement for a 50% discount for interest income which was due to commence on 1 July 2013.
The Government said its public consultation process involving key sector groups, industry participants and consumer groups “revealed concerns with the complexity involved in calculating the discount and its overall effectiveness”.
In the lead-up to the Budget, the Prime Minister announced that the Government will make a new, no-strings cash payment, called the Schoolkids Bonus, to certain families with children at school. It will replace the current Education Tax Refund and will apply from 1 January 2013. Each year, families will receive the Schoolkids Bonus worth:
- $410 for each child in primary school; and
- $820 for each child in high school.
The Government said the payment will be “automatic and upfront”, which means eligible parents will not need to keep receipts.
Flood Levy – Further Exemptions
The Treasurer confirmed in the Budget that people who suffered flood damage in 2012 will also be made exempt from the flood and cyclone levy that applies for the 2011¬–2012 financial year only. He said that earlier this year, more flooding devastated parts of western Queensland and northern New South Wales.
Company Tax Cut Proposal Shelved
The Treasurer announced that the proposed reduction in the company tax rate to 29% will not proceed. The reason given by the Treasurer was that it had become clear that the proposed tax rate cut would not be approved by Parliament.
The Treasurer added that the savings from not proceeding with the company tax cut will be used to fund other measures, including the loss carry-back arrangement for companies.
Tax Loss Carry-back Regime Confirmed
The Treasurer confirmed the Government will allow businesses to carry-back losses. Mr Swan said the proposed changes would “allow businesses to ‘carry back’ their losses, to offset past profits and get a refund of tax previously paid on that profit”. The carry-back will be available to companies and entities that are taxed like companies.
As part of the loss carry-back, from 1 July 2012 companies will be able to carry back up to $1 million worth of losses to get a refund of tax paid in the previous year. From 1 July 2013, companies will be able to carry back up to $1m worth of losses against tax paid up to two years earlier.
According to the Government, in its first four years the regime “is estimated to provide much-needed assistance to nearly 110,000 companies”.
Super Contributions Tax Changes
From 1 July 2012, individuals with income greater than $300,000 will have the tax concession on their concessional contributions reduced from 30% to 15% (excluding the Medicare levy). This means that the tax rate on concessional contributions will effectively double from 15% to 30% for very high income earners from 1 July 2012.
Currently, the 15% flat tax on concessional contributions (paid by the receiving superannuation fund) provides high income earners with a significantly larger tax concession than those on lower marginal tax rates. The Minister for Financial Services and Superannuation, Bill Shorten, said a small number of people on high incomes are getting a better tax deal out of super than millions on average incomes.
The proposed reduction in the higher tax concession that is currently available for very high income earners on their concessional contributions will align it more closely with the concession received by average income earners, Mr Shorten said. However, there will still be an effective tax concession of 15% (up to the concessional contributions cap of $25,000) for these high income earners.
Contributions Cap for over 50s
The proposed higher concessional contributions cap for individuals aged 50 and over with superannuation balances below $500,000 will be deferred from 1 July 2012 to 1 July 2014. Accordingly, all taxpayers, regardless of age, will be subject to a concessional contributions cap of $25,000 for the 2012–2013 and 2013–2014 income years.
In 2014–2015, the general cap is expected to increase to $30,000 through indexation, and the higher cap would then commence at $55,000 for eligible taxpayers aged 50 and over.
Funding to Target Tax Debts
The Government announced that it will provide $106 million over four years to the ATO to improve the management of outstanding taxation debts and superannuation guarantee charge. The Government said the funding is designed “to allow the ATO to support a greater range of taxpayers in meeting their reporting and payment obligations through contacting them earlier and by providing more targeted assistance”.
GST Compliance Program
The Government is to provide $193.3 million to the ATO in 2014–2015 and 2015–2016 to continue to promote voluntary GST compliance. This extends a 2010–2011 Budget measure by two years. The funding will be directed at detecting fraudulent GST refunds, systematic under-reporting of GST liabilities, failure to lodge GST returns and outstanding GST debts.