2009-2010 Federal Budget Tax Measures
The Concessional Cap (CC) for superannuation contributions
introduced under the Better Super regime has been halved from $50,000 to
$25,000, and the Transitional Concessional Cap (TCC) has been reduced to
$50,000 per year from its former non-indexed limit of $100,000 effective 1 July
2009
The Non-concessional Contributions Cap (NCC) will remain at
$150,000 for 2009-10 (or $450,000 under the ‘bring forward option’ over 3
years), and
The Government Co-contribution Scheme (GCS) will be reduced
to a rate of 100% for contributed amounts for the 2009-10, 2010-11 and 2011-12
years, increasing to 125% for the 2012-13 and 2013-14 years and returning to
150% for the 2014-15 year.
Concessional contributions caps reduced
[Editor: Recently updated cap thresholds released by the Tax
Office had increased the CC for 2009-10 to $55,000. Therefore it would appear
that the Budget Night change amounts to more than a halving (approx. 54.5%) of
what would have been the applicable cap for 2009-10.]
The government has made its first rollback of the Better
Super reforms, reducing the concessional contributions caps from the start of
the 2009-10 income year. The concessional
contributions cap has been halved to $25,000 a year from its current limit of
$50,000. The government will introduce special concessions for persons who are
defined benefit fund members on 12 May 2009.
A reduction will also apply to the transitional threshold
for concessional contributions. The transitional concessional cap will be
reduced from its current annual level of $100,000 to $50,000 per year. The
transitional concessional cap of $50,000 will apply for the 2009-10, 2010-11
and 2011-12 years of income.
The government has ruled out any reduction to the
non-concessional caps at this time, stating that they remain at $150,000
(indexed) which will now be six times the amount of the concessional cap for
the 2009-10 income year and beyond.
Non-concessional contributions cap unchanged
The Non-concessional Contributions Cap (NCC) will remain at
$150,000 for the 2009-10 (or $450,000 under the ‘bring forward option’ over 3
years). In the future, the non-concessional contributions cap will only
increase when the new lower $25,000 cap is increased by indexation. It will be
calculated as 6 times the level of the indexed concessional contributions cap.
The Government Co-contribution Scheme will be reduced to
100% of eligible contributions for 2009-10, 2010-11 and 2011-12 income years,
with the rate increasing to 125% of contributions for the 2012-13 and 2013-14
years and returning to its former level of 150% for the 2014-15 year.
The adjusted superannuation co-contribution rates from 1
July 2009 will be:
100% for 2009-10, 2010-11 and 2011-12, with a maximum
co-contribution of $1000, reduced by 3.333 cents for each dollar by which the
person’s total income exceeds the shade out threshold for receiving the full
co-contribution
125% for 2012-13 and 2013-14, with a maximum co-contribution
of $1,250, reduced by 4.167 cents for each dollar of total income above the
shade out threshold, and
150% from 2014-15 onwards, with a maximum co-contribution of
$1,500, reduced by 5 cents for each dollar of total income above the shade out
threshold.
Other superannuation and retirement measures
The age pension age will be gradually increased to 67 years
of age
The income test taper will be altered to increase the rate
at which the pension is reduced with increasing private income. It will be
increased from 40 to 50 cents for each additional dollar of income received by
the pensioner
Superannuation funds will be required to align their lost
superannuation reporting with unclaimed money regulations and to transfer lost
superannuation accounts with balances less than $200 to unclaimed monies
A halving of the minimum annual drawdown amount for
account-based pensions has been extended to include the 2009-10 financial year
The future tax panel's review into retirement incomes has
released its report, recommending keeping the superannuation guarantee charge
at 9%, increasing the age pension age to 67 years and aligning the age pension
with the preservation age, and
Australia and New Zealand have agreed in principle to allow
movement of superannuation benefits between Australian and New Zealand
superannuation funds.
Pension age to be increased to 67
The age pension age will be gradually increased to 67 years
of age. The new pension changes will apply to new pension entrants from 1 July
2017, which will mean that it applies to people who are 57 years of age or
younger on July 2009.
Income test taper
The Income test taper will be altered to increase the rate
at which the pension is reduced with increasing private income. It will be
increased from 40 to 50 cents for each additional dollar of income received by
the pensioner.
Lost superannuation accounts amendments
Two small amendments have been made to the treatment of lost
superannuation amounts. These changes are:
superannuation providers will be
required to transfer lost accounts with balances less than $200, or which have
been inactive for five years and for which there are insufficient records to
identify the owner of the account, to unclaimed monies. This measure will apply
from the 2010-11 income year, and
superannuation providers
obligations under the unclaimed money regime will be matched with the
requirements of the temporary resident unclaimed superannuation regime. The
amended regime will apply to payments of unclaimed money due after 1 July 2009.
Pension drawdown relief extended
The minimum drawdown amount for account-based pensions will
be halved for the 2009-10 income year. This extends the current drawdown relief
concession provided to self-funded retirees for the 2008-09 income year.
The Seniors Supplement payment will also be made available
to certain self-funded retirees. Self-funded retirees who are eligible for the
Senior's Health Card or the Department of Veteran's
Affairs Gold card with Seniors Concession Allowance will be eligible for the
annual payment of $790.40 for singles and $1190.80 for couples.
Australia and New Zealand have agreed in principle to allow
movement of superannuation benefits between Australian and New Zealand
superannuation funds. The final details of the scheme are currently being
settled with New Zealand.
INDIVIDUALS
Tax Rates changes remain
The Government has left the tax rate cuts announced in the
previous Budget unchanged. As a result, the Government will deliver in full the
tax cuts
Foreign Employment Income
The Government has announced they will amend the general
exemption available for Australians working overseas for over 90 consecutive
days so that this exemption is targets at only for income earned:
as an aid or charitable worker
employed by a recognised non-government organisation; or
as a government aid worker; or
as a specified government employee
(for example, defence and police force personnel
deployed overseas).
Further, income earned by an individual employed on an
overseas project approved by the Minister for Trade as being in the national
interest will remain exempt, as provided for by existing rules.
To avoid Australians paying double-taxation, a tax offset
will be available for any foreign tax paid on their foreign employment income.
Private Health rebates & Medicare levy surcharge
The Government has announced that the 30% Private Health
Insurance Rebate will be reduced for single taxpayers earning more than
$75,000, and families earning more than $150,000 per year from 1 July 2010.
According to the budget announcement, the Medicare levy
surcharge rate will also be increased for singles earning above $90,000 and
families above $180,000 to continue to provide higher income Australians with
incentives to take out private health insurance.
Increase in Medicare levy low-income thresholds
From the 2008-09 income year, the
Medicare levy low-income thresholds will be increased:
Individuals: $17,794
Individuals in families: $30,025
Pensioners below Age Pension age: $2,757
The additional amount of threshold for each dependent child
or student will also increase to $2,757.
Various family payment changes
Paid Parental Leave
The Government has announced the first ever comprehensive
Paid Parental Leave scheme. The scheme will be available to parents for births
and adoptions that occur on or after 1 January 2011 and parents will be able to
lodge claims from 1 October 2010.
The scheme will provide 18 weeks postnatal leave paid at the
federal minimum wage (currently $543.78 per week). There is some eligibility
requirement for the scheme which is largely based on being actively in the work
force prior to the birth or adoption of the child and includes a means test of
an adjustable taxable income of $150,000 or less in the financial year prior to
the date of birth or adoption of the child.
The Government has said it will provide employers with the
funds in advance and employers will act as “paymasters” in most situations.
Alignment across Family Assistance Office and Child Support
Program
Government will ensure that parents only have to participate
in one care determination to work out both their child support and family
assistance entitlement. This measure which removes the duplication between the
Child Support Program and Centrelink and simplifies
the process for parents provides government a saving of $0.5million over four
years and ongoing savings thereafter of approximately $10 million per annum
from 2012 13.
Reform of family
payments — Family Tax Benefit Part A (FTB
A)
The Family Tax Benefit Part A (FTB-A) for children under 16
is currently benchmarked to the higher of a proportion of the combined couple
pensioner rate or the Consumer Price Index (CPI). From 1 July 2009, FTB A
payment rates will be indexed by the CPI. This is in line with other family
payments such as Family Tax Benefit Part B and the Baby Bonus. Government
expects this measure will generate savings of $1.0 billion over four years.
Reform of family payments — pause to indexation of upper
income thresholds of FTB A, FTB B and Baby Bonus
Government has frozen the indexation of a number of family
payment thresholds until July 2012. While the expected savings will generate an
additional $1.4 billion over the next four years, the measure is focused on
better targeting those families most in need. The following higher income
thresholds for family payments are affected:
The Family Tax Benefit Part B primary earner income
threshold - $150,000
Dependency tax offsets threshold - $150,000
Baby Bonus eligibility threshold - $75,000 of family income
in the six months following the birth or adoption of a child (equivalent to
$150,000 a year),
FTB-A higher income free area - $94,316 of family income
(plus $3,796 for each child after the first).
Higher Education
System for the 21st Century
Government has announced a number of measures highlighting
the higher education system.
Education and nursing graduates working in those professions
will have a reduction of $1,536 to the required HELP debt repayments. The HELP
debts will be reduced by $1,536 (indexed annually by the Consumer Price Index)
for each year the graduates work in these professions, up to a maximum of five
years. This measure targets students graduating from semester two 2009 and is
designed to encourage continuation of employment in these professions.
BUSINESS TAXATION
Small Business and General Business Tax Break
The budget announcement outlines an expansion of the “tax
break” proposed for business taxpayers investing in eligible new depreciating
assets or enhancing existing assets. Currently the Tax Laws Amendment (Small
Business and General Business Tax Break ) Bill 2009
provides for an additional deduction at a rate of 30% for investment committed
by 30 June 2009, provided the asset is installed ready for use by 30 June 2010.
The rate of deduction is proposed to fall to 10% for investment committed
between 1 July 2009 and 31 December 2009 where installation of the asset is
completed by 31 December 2010. This Bill is currently before parliament.
The budget announcement increases the rate of deduction to
50% for “small businesses” acquiring an eligible asset between 13 December 2008
and 31 December 2009 provided the asset is installed ready for use by 31
December 2010.
It is assumed that the term “small businesses” will refer to
a small business entity as presently defined in the tax law ie
carrying on business with an aggregated annual turnover of less than $2
million.
Example: A small business entity expending $30,000 on 12 May
2009 to acquire an eligible asset which is installed ready for use on 1 July
2009 would obtain an additional deduction of $15,000 in the 2009-10 year. This
presumes the legislation is ultimately enacted in accordance with the terms of
the budget announcement.
The existing provisions contained in the Bill which is
currently before parliament are intended to continue to apply to businesses which
are not “small businesses.”
Research & Development
From 2010-11, the existing R&D Tax Concession will be
replaced with a simplified R&D Tax Credit system. The new Tax Credit
provides a 45 per cent refundable credit for firms with an annual turnover of
less than $20 million. This is equivalent to a Tax Concession of 150 per cent.
This means that firms will receive a tax refund of 45 per cent of their R&D
spending when they file their tax return. The refundable credit will be
available to small companies in tax loss, with no limit on the level of R&D
expenditure they undertake.
Businesses with a turnover of more than $20 million will
also benefit from the new scheme, with access to a 40 per cent non-refundable
credit. This is equivalent to a tax concession of 133 per cent. Companies
undertaking R&D in Australia where the intellectual property is held
offshore will also be able to access the 40 per cent non-refundable credit.
As a transitional measure for 2009-10, the R&D
expenditure cap for the existing R&D Tax Offset will be lifted from $1
million to $2 million. The cap is the maximum amount a firm can spend on
R&D to be eligible for the Tax Offset. Under the new Tax Credit system,
eligibility criteria will be tightened to support only genuine R&D.
Employee Share Schemes
Significant changes have been made to the taxation of shares
and options received under employee share schemes. All discounts on shares and
options provided under an employee share scheme will now be assessed in the
income year in which they are acquired, whether they are qualifying or
non-qualifying. This means employees acquiring shares or options under
qualifying employee share schemes will no longer be
able to elect to defer taxation on their discount to a later time.
The Government will also limit access to the $1,000 upfront
concession. The $1,000 upfront tax exemption will be limited to those employees
with a taxable income of less than $60,000 after adjustment for fringe
benefits, salary sacrifice and negative gearing losses.
These measures will apply to shares and options acquired
after 7.30pm on 12 May 2009. The measures will not affect shares or options
already held by employees.
Use of Non-Commercial Losses
The budget announcement proposes to remove the ability of
taxpayers with an adjusted taxable income more than $250,000 to apply losses
from non-commercial business activities against income from other sources such
as salary or investment income. Such losses will only be able to be offset
against income from the business activity. Taxpayers will have the ability to
seek an exercise of discretion from the Commissioner of Taxation to ignore the
new rules where exceptional circumstances exist or where the business being
carried on is independently assessed as commercially viable.
The measures are intended to apply from the 2009-10 income
year.
The existing non-commercial loss rules will continue to
apply to taxpayers with an adjusted taxable income of $250,000 or less.
Extending TFN withholding to closely-held trusts
The government intends to extend the current TFN withholding
arrangements to closely-held trusts to ensure that assessable distributions to
beneficiaries as disclosed in the trust income tax return aligns with the
amounts returned as assessable income by those beneficiaries.
It is likely that closely-held trusts will be defined as
discretionary trusts and other trusts with fewer than twenty beneficiaries.
The announcement indicates that the withholding obligation
will apply to family trusts.
It is intended that the arrangement operates as follows:
a beneficiary of a closely held
trust will be required to provide their TFN to the fund trustee prior to a
distribution being made;
if the TFN is provided, no
withholding will occur;
if the beneficiary does not provide
their TFN to the trustee, the trustee will be required to withhold tax from the
distribution for remittance to the Tax Office;
where the trustee has withheld tax,
the applicable beneficiary will be entitled to a corresponding tax credit upon lodgement of their income tax return.
Withholding will not apply where the trustee is assessed to
tax on behalf of a beneficiary, such as in the case of a minor beneficiary.
The measure is intended to apply from 1 July 2010.
Entrepreneurs' tax offset — defer
the application of the income test
Government will defer the application of the income test for
the Entrepreneurs' Tax Offset (ETO) announced in the 2008-09 Budget for 12
months. Previously, in the 08/09 budget
government announced, the income test will focus the benefit of the ETO towards
genuine small businesses, by restricting eligibility for singles from $75,000
and families from $120,000 adjusted taxable income per year.
The Government is to consult on how the income test will
apply from the 2009-10 financial year.
Government proposes a tightening of the rules of the
Division 7A loan rules. These rules are
designed to increase the integrity of the regime and will be extended to
capture payments by way of a licence or right to use
real property and chattels. This measure further captures those transactions
conducted by private company shareholders or their associates at less than
market value.
Review of DGR registers
The Government has announced they will commence a review of
the Deductible Gift Recipient Registers. The reviews will encompass the
guidelines for the registers and the organisations on
the registers.
Uniform Capital Allowance Regime
The government has identified twenty eight “issues” which
require attention in order to ensure the uniform capital allowance regime in
Division 40 ITAA 1997 operates in the intended manner and with reduced
compliance costs.
The proposed amendments are technical in nature and in some
instances are merely intended to provide clarification of the law. The
amendments will mostly apply from 1 July 2009 with a small number having
retrospective application to 1 July 2001.
The proposed amendments deal with issues such as:
the interpretation of items 5 &
6 in s 40-40 (the “holder” provisions);
the interaction between divisions
40 (UCA) and 240 (hire purchase transactions);
aspects of sale and leaseback
transactions;
cost rules for software development
pools;
the interaction between the CGT
provisions and the UCA regime; and
application of the UCA regime to
mining rights.
GST
From 1 July 2010 the administration of GST is to be
streamlined and compliance costs reduced
Those countries that are eligible for the Indirect Tax
Concession Scheme have been expanded
Legislation will be amended to clarify GST treatment of the
Carbon Pollution Reduction Scheme
OTHER & TAX ADMINISTRATION
Review of unlimited amendment periods and elections in the
tax law
The Government will move to repeal over 100 provisions in
the income tax laws that currently provide the Commissioner with an unlimited
period in which to amend an item in a taxpayer’s income tax return.
First Home Owner Boost
The Government announced that the First Home Owners Boost will continue for an extra six months, although this will be divided into two extension periods of eligibility that consider the date of the contract and whether the purchase is for an existing home.