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2011/2012 Federal Budget

Treasurer Wayne Swan has handed down his budget for the 2011/2012 year.

It was been widely noted as being a lacklustre budget with a jobs focus, and is aiming to return the budget to surplus in the 2012/2013 year.

We have reviewed the budget and summarised the pertinent issues below; we trust that this gives you an understanding of what was in the budget speech as it applies to families, superannuation and business.

Families

• Cuts to the effective tax rates for some 50,000 single parents by up to 20 cents in the $.
• Dependent spouse offset will be phased out where the spouse is under 40, aimed at increasing the work incentive for spouses without children.
• From 1 January 2012 the discount for paying HECS upfront halves (20% to 10%) as does the discount for voluntary repayments (10% down to 5%).
• Increase in Family Tax Benefit for 16 to 19 year olds by up to $4,208 depending on parents income.
• Continuing the freeze on the indexing of upper family tax benefit income thresholds for families for 2 more years, meaning families on higher incomes will start to drop out of accessing FTB as their income increases.
• Limit the eligibility for FTB Part A to children under 21, rather than under 24.

Superannuation

• Minimum pension amounts, which had been reduced by 50% only become reduced by 25% for the 2011/2012 year and no reduction for the 2012/2013 year. This means that funds in pension phase have to increase the minimum amounts paid out.
• From next July all over 50’s will be able to contribute $25,000 more than those under 50 and get a tax deduction (subject to other qualifying criteria).
• Remove the ability to claim share trading losses in a super fund against other fund income, with the point being that super funds should be primarily aimed at gains

Business

• Fringe Benefits Tax statutory rate becomes one fixed rate, instead of 4 depending on kilometres travelled in a year. Comes into effect for new vehicles purchased from today and will be phased in over 4 years for existing vehicles.
• Ability to immediately deduct the first $5,000 of a vehicle purchase, with the balance depreciated as normal.
• Replacement of Entrepreneurs Tax Offset with a more widely available offset.
• Removal of ability of minors to access the low income offset for unearned income (eg rent, dividends, interest, trust distribution). Biggest impact we see is with trust distribution, effectively reducing the amount that can be distributed to each child from $3,200 to $416.
• Requirement for some businesses in the building and construction industry to report payments to contractors to the ATO, aimed at tightening tax enforcement.