2011 12 Budget At A Glance

Wednesday, 11 May 2011

Mr Wayne Swan handed down the Federal Budget for 2011/12 at 7:30pm (AEST) yesterday, May 10 2011.

Despite the impact of recent natural disasters affecting the country the Budget is fiscally tight, designed to achieve a return to surplus in 2012/13. The Budget contains a number of anticipated tax changes relating to the low income tax offset for unearned income for minors, refunding excess concessional superannuation contributions and amendments to the FBT statutory formula method for valuing car fringe benefits. The integrity of the no-for-profit sector has also had measures implements with a view of improving its integrity.

We have included below some of the tax and superannuation highlights from the Budget release.

This is a summary only and if you would like further information, or wish to discuss your personal circumstance, please contact us as soon as possible.

General Measures

Certain trusts and partnerships keeping accounts in foreign currency can calculate net incoming using that currency
The roll-out of the National Rental Affordability Scheme will be spread over a longer period
Minor amendments will be made to various rules affecting the CGT main residence exemption, small business participation percentage and appointment of a director of a self managed superannuation fund trustee
Primary Producers affected by natural disasters can access their farm management deposits within 12 months of making the deposit without losing their concessional tax treatments under the scheme

Individuals and Families

To help encourage more Australians into paid employment the rebate for dependent spouses aged under 40 will be phased out
The amount of the low income tax offset delivered to low and middle income earners through their regular pay during the year will be increased from 50% to 70% of their total entitlements
Access to the low income tax offset to reduce tax payable on unearned income, such as rent, dividends, interest, other income from property and royalties, will be limited for minors (children under 18 years of age) as of 1 July 2011
Self-education expenses will no longer be deductible against government assistance payments from 1 July 2011
The discount available to students electing to pay their HECS student contribution up-front will be reduced from 20% to 10% from 1 Jannuary 2012. The bonus on voluntary payments to the ATO of $500 or more will be reduced from 10% to 5% Families in receipt of Family Tax Benefit Part A will be eligible for an advance of up to 7.5%, to a maximum of $1,000, of their annual Family Tax Benefit Part A entitilement from 1 July 2011
Indexation of the Family Tax Benefit Part A and B supplements, along with indexation of family payment higher income thresholds and limits, will be suspended for 3 years

Companies

The company loss recoupment rules will be amended, making it easier for companies to satisfy the continuity of ownership test rules

FBT

The scale of statutory rates currently used to calculate the taxable value of a car fringe benefit under the “statutory formula” method will be replaced with a flat rate of 20%

CGT

The rules governing access to the small business CGT concessions will be broadened for some small businesses and tightened for trusts
Gains or losses from renewable resource assests or preserving environmental amenity will be CGT exempt
Tax laws will receive minor amendments to ensure the CGT provisions operate as intended
Scrip for scrip rollover integrity provisions are to apply to trusts, superannuation funds and life insurance companies
Special disability trusts will receive various concessions to make them more beneficial to families

Not-for-profit sector

A new Charities and Not-for-profits Commissioner and a range of reforms to the NFP sector, including a statutory definition of “charity”, to ensure the concessions are targeted only at those activities that directly further a NFP’s altruistic purpose

Financial arrangements

Amendments to the TOFA rules relating to hedging to ensure they operate as intended
Amendments to debt/equity rules to restrict the application of an integrity provision that deems an interest from an arrangement that funds a return through connected entities to be an equity interest under certain circumstances
The tax rules for securities lending arrangements will be amended for certain situations to ensure that the lender under a securities lending arrangement is treated as not having disposed of the lent securities

International tax

Arrangements for Interim Investment Manager Regimes will be extended to the 2010/11 year
The list of countries whose residents are eligible to access a reduced rate of withholding tax on certain distributions from Australian managed investment trusts reported in the Taxation Administration Regulations 1976 will be updated

Superannuation

Rather than incurring excess contributions tax, eligible individuals will have the option of having excess concessional superannuation contributions assessed as income at their marginal tax rate
Over 50s with superannuation balances under $500,000 will have higher concessional contributions caps applied from 1 July 2012
Superannuation fund trustees will be able to make greater use of tax file numbers to locate member accounts
Information will be supplied on Employees payslips about the amount of superannuation paid into their accounts
Certain assets will no longer be able to be treated as trading stock by superannuation funds
The pensions draw down relief that has been provided over the last three years will be phased out
There will be an extension of an additional year for the freeze on the indexation of the income threshold for superannuation co-contribution purposes

Tax administration

To ensure continuous operation there will be a correction to the technical deficiency in the transitional rules on imposing general interest charge and shortfall interest charge liabilities
Various measures to improve tax compliance will be introduced including increasing ATO resources and increasing company directors’ personal liabilities for company debts
The GDP adjustment factor for PAYG instalment taxpayers who use the GDP adjustment method will be reduced from 8% to 4% for the 2011/12 income year

GST

Small businesses in a net refund position will be allowed access to the GST instalment system
The start date will be delayed for certain GST reform measures recommended by the Board of Taxation
The GST treatment of property in possession of a mortgagee will be amended from 1 July 2012

Disclaimer No person should rely on the contents of this publication without first obtaining advice from a qualified person. HMW Partners are not responsible for the results of any actions taken or not taken on the basis of information in this publication, nor for any errors or omissions from this publication. HMW Partners expressly disclaim all and any liability and responsibility to any person in respect of anything and of the consequences of anything done or omitted to be done by any such person in reliance upon all or any part of this documentation. Liability limited by a scheme approved under professional standards legislation.

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