Federal Budget 2009
The Treasurer handed down his second budget on 12th May 2009 "Nation Building for the Recovery". A budget focussed on "investing in infrastructure, supporting jobs and productivity and positioning for the recovery".
Although no significant tax changes were announced, there are a number of taxation and superannuation changes which may impact many of our clients.
Superannuation Concessions
Reduction in Concessional Contributions Cap
There was much speculation prior to the budget that the Government would initiate the first roll back of the Simpler Superannuation regime. The Government announced the concessional contributions cap will be reduced from $50,000 to $25,000 effective 1st July 2009. For those aged 50 years or over, the transitional contributions cap will be reduced from $100,000 to $50,000. The transitional contributions cap will continue to apply for the 2009/10, 2010/11 and 2011/12 years after which it will reduce to $25,000.
There is no proposed change to the non-concessional contributions cap i.e. $150,000 per year or $450,000 under the "bring forward" provisions.
Superannuation Co Contribution Decreased
The Government currently contributes $1.50 (150%) for every $1.00 invested into superannuation as an “after tax” contribution for taxpayers earning less than $30,342 per year, with eligibility shading out for incomes between $30,342 to $60,342. The maximum which could be received as a co contribution is $1,500.
The Government announced the co-contribution would be reduced to 100% of eligible contributions for the 2009/10, 2010/11 and 2011/12 income years with a maximum contribution of $1,000. The rate will increase to 125% of contributions for 2012/13 and 2013/14 income years after which it will increase to 150%. Shading out provisions will apply.
Business Taxation
Small Business and General Business Tax Break
Changes which will expand the tax break available to small business were announced in the Federal Budget.
Small businesses with a turnover of less than $2 million can claim an additional 50% tax deduction for eligible assets costing $1,000 or more, acquired between 13th December 2008 and 31st December 2009 which are installed and ready for use by 31st December 2010.
The previously announced General Business Tax Break remains unchanged. Other businesses can claim an additional 30% tax deduction for eligible assets costing $10,000 or more acquired between 13th December 2008 and 30th June 2009, which are installed and ready for use by 30th June 2010. This tax break is reduced to 10% for assets acquired between 1st July and 31st December 2009 which are installed and ready for use by 31st December 2010.
Other Business Taxation Measures
The existing Research & Development Taxation Concession will be replaced with a simplified R&D Tax Credit system effective 1st July 2010. The Division 7A rules will be tightened effective 1st July 2009. The new rules will limit the scope for private companies to allow shareholders or their associates to use assets owned by the company for free or at less than an arms length value. This will include assets such as real estate and cars.
Personal Taxation
Tax Rates
The reductions in personal income tax rates as announced in the previous budget remain unchanged. The income tax rates for resident individuals for the financial year 2009/10 are:
| Taxable Income | Rate |
|---|---|
| $0 - $6000 | nil |
| $6,001 - $35,000 |
15¢ for each |
| $35,001 - $80,000 | $4,350 plus 30¢ for each $1 over $35,000 |
| $80,001 - $180,000 | $17,850 plus 38¢ for each $1 over $80,000 |
| $180,001 and above | $55,850 plus 45¢ for each $1 over $180,000 |
Private Health Insurance Rebate and Medicare Levy Surcharge
The Government announced reforms to the current 30% rebate for Private Health Insurance. Effective 1st July 2010, the 30% rebate will be means tested for singles earning $75,000 or more and families earning $150,000 or more. The rebate will be reduced to nil for singles earning $120,000 or more and families earning $240,000 or more.
The Medicare levy surcharge, currently an additional 1% for those exceeding the thresholds without private health insurance will also increase effective 1st July 2010. This will directly impact singles earning $90,000 or more and families earning $180,000 or more without Private Health Insurance.
Non Commercial Losses
The proposed changes to the non commercial loss rules will directly impact high wealth individuals. The current rules allow individuals to offset losses from non commercial business activities against other income provided one of the four non commercial loss rule tests is satisfied. Under the proposed changes individuals with an adjusted taxable income of $250,000 or more will no longer be able to apply these losses against other income. The rules remain unchanged for individuals with an adjusted taxable income of $250,000 or less. This measure is intended to apply from the 2009/10 income year.
There were additional reforms announced in the federal budget which fall outside the scope of this article. If you wish to discuss how these measures may impact you or your business please contact your Lawler Draper Dillon Consultant. The proposed changes still need to be passed by Parliament.
