Main Changes from 7.30 p.m. 10th May, 2011

Car Fringe Benefits: Statutory Formula reformed to replace current 4 levels of calculation to one single rate of 20% regardless of distant travelled. This will make it imperative to complete a logbook for anyone who travels more than 25,000 kms per year.

Main Changes from 1st July, 2011

Dependant Spouse Tax Offset: will be phased out for dependant spouses born on or after 1 July, 1971 (so 40 years old). Exceptions include invalid and permanently disabled spouses.

Low-Income Tax Offset (“LITO”):
(a) Removal of Minors LITO on unearned income. This will have an immediate effect on discretionary trusts and is designed to prevent income splitting between adults and their children. Exceptions exist for orphans and disabled children, compensation payments and inheritances received by minors.

(b) The amount of LITO given to lower income earners during the year will be increased from 50% to 70% of the total entitlement, the remaining 30% will be credited when the tax return is lodged.

Deductions against Government Assistance Payments
Individuals will be disallowed from claiming deductions for expenses against all government assistance payments.

However, individuals who receive a student Youth Allowance can still claim a deduction for expenses incurred in gaining their payment for the 2010/11 income year.

Minimum pensions
At the commencement of the Global Financial Crisis the government halved the minimum pension payable for an account-based pension. This minimum pension is being returned to normal with a 25% reduced minimum pension in 2011-12 and a full minimum pension in 2012-13.

Excess Contributions- Superannuation
Excess contributions arise when the tax deductible limit is exceeded ($25,000 for people under 50 and $50,000 for people over 50). Excess Contributions can also arise when the non tax deducted contributions exceed $150,000 or $450,000 taken over 3 years –if that applies).

However, it is quite easy to exceed the tax deductible contributions limits, especially where there are multiple sources of income. Up to $10,000 it will be possible to to have excess contributions taken out of the superannuation fund and assessed at the taxpayer’s marginal rate and excess contributions tax (at 31.5%) will not apply.

Main changes from 1 July, 2012
Entrepreneurs Tax Offset: abolished. This is to be replaced with a small business tax package that includes immediate deduction for motor vehicles ($5,000) and other provisions including higher depreciation rates and a lower company tax rate.

Higher Superannuation Cap: Eligible individuals aged over 50 with superannuation balances of less than $500,000 will be allowed a further $25,000 tax deducted superannuation amount above the normal limit. The current limit (for those over 50) is $50,000. How this will operate in practice is still under discussion.

Reporting Superannuation Paid to Employees: Employees will receive information on payslips stating how much superannuation has been paid.

Immediate $5,000 initial deduction for motor vehicles
Small businesses will be allowed to claim up to $5,000 as an immediate deduction for motor vehicles acquired from 2012/13 income year. The remaining cost of the vehicle value will be added to the General Small Business pool depreciated at 15% in the firast year and 30% in the second and later years under the existing simplified depreciation rules for small business entities.

HECS discounts reduced
From 1 July, 2012, the following discounts applying to HECs payments will be reduced:
- The discount for making an up-front payment will be reduced from 20% to 10% and
- The bonus on voluntary payments of $500 or more will be reduced from 10% to 5%

Please Note: Many of the comments in this publication are general in nature and anyone intending to apply the information to practical circumstances should seek professional advice to independently verify their interpretation and the information’s applicability to their particular circumstances.