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The following sections summarise the relevant announcements made by the Federal Government in releasing the 2011-2012 Federal Budget on 10 May 2011.

Personal Income Tax Rates Unchanged
The release of the Federal Budget has confirmed that there are to be no tax rate or threshold changes applying from 1 July 2011.

Tax rates for resident individuals (excluding medicare levy) for the year ending 30 June 2012 are therefore:

Taxable Income

Tax Rate and Tax Payable

$0 to $6,000

Nil

$6,001 to $37,000

15 cents for each dollar over $6,000

$37,001 to $80,000

$4,650 plus 30 cents for each dollar over $37,000

$80,001 to $180,000

$17,550 plus 37 cents for each dollar over $80,000

$180,001 and above

$54,550 plus 45 cents for each dollar over $180,000


However, changes to the various withholding schedules and update of the payroll software utilised by businesses will be required due to a further amount of the Low Income Tax Offset being brought forward and the introduction of the Flood Levy.

Low Income Tax Offset
The amount of the Low Income Tax Offset received by low to middle income earners through their pay will increase from 50 per cent to 70 per cent of their total entitlement.  The remaining 30 per cent of their entitlement will be received upon lodgement of their income tax return.

Flood Levy
The Flood Levy applies for the year ending 30 June 2012 only.  The Levy is at a rate of 0.50 per cent on taxable income between $50,001 and $100,000, and then a rate of 1.00 per cent on taxable income above $100,000.  No Levy is payable where taxable income is $50,000 or less.

Business Measures
Small Business Motor Vehicle Write Off

From 1 July 2012, small businesses will be allowed to claim up to $5,000 as an immediate tax deduction on the purchase of a motor vehicle.  The balance of the motor vehicle’s cost will be pooled in the business’ general small business pool and so depreciated at 15 per cent in the first year and then 30% thereafter.

The general small business pool refers to an announcement in the 2010-2011 Federal Budget.  This was that from 1 July 2012 all small business assets, excluding buildings, will be depreciated in a single depreciation pool at a rate of 30 per cent per year.  This single pool replaces the existing general and long life pools.  Further, the 2010-2011 Federal Budget also included that the existing small business capital allowance concessions will be expanded.  Small business entities can currently obtain an immediate deduction for expenditure on assets costing less than $1,000.  From 1 July 2012, this threshold will increase to $5,000.  In addition, the intended reduction in company tax rate for small businesses to 29 per cent from that date was also referred to.

Small businesses are generally those with an aggregated turnover of less than $2 million.

Car Fringe Benefits and a Flat 20 Per Cent Statutory Rate
The taxable value of car fringe benefits for fringe benefits tax (FBT) purposes can be calculated under either the Operating Cost or Statutory Formula Methods.

Broadly, the Operating Cost Method applies the private use percentage to the operating costs of the car for the FBT year.  The Statutory Formula Method applies a lower percentage in the value calculation the greater the annual kilometres travelled.  It is therefore often the beneficial calculation method for employees with high annual kilometres travelled but perhaps a low business use percentage.

The Federal Government will reform this Statutory Formula Method by replacing the current statutory rates with a single rate of 20%, this single rate would apply regardless of the annual kilometres travelled.  This measure was a recommendation made in The Henry Review.

This change would be phased in over four (4) years, applying to new contracts entered into after 7:30pm (AEST) on 10 May 2011, as illustrated in the following table.

Distance travelled during the FBT year

Statutory Rate

Existing Contracts

New contracts entered into after 7:30pm (AEST) on 10 May 2011

From 10 May 2011

From 1 April 2012

From 1 April 2013

From 1 April 2014

0 - 15,000 km

0.26

0.20

0.20

0.20

0.20

15,000 - 25,000 km

0.20

0.20

0.20

0.20

0.20

25,000 - 40,000 km

0.11

0.14

0.17

0.20

0.20

More than 40,000 km

0.07

0.10

0.13

0.17

0.20


Employers and employees entering into salary packaging arrangements need to consider the impact of these changes.  Further, employers may need to reconsider the most appropriate calculation method to be utilised, and the different record keeping that may then be required.

Farm Management Deposits
The Farm Management Deposits Scheme provides concessional tax treatment for primary producers who make such deposits and don’t withdraw them within twelve (12) months.

The Federal Government will allow withdrawal of funds from the deposit within the twelve (12) months for primary producers affected by natural disasters.

Superannuation Measures
Limited Refund of Excess Concessional Contributions


Excess contributions tax is incurred where an individual exceeds their concessional contributions cap, it is at a rate of 31.5 per cent in addition to the 15 per cent tax payable on contributions to the fund.

Eligible individuals will be provided with the option to have excess concessional contributions taken out of their superannuation fund and assessed to themselves as income at their marginal rate of tax rather than incurring the excess contributions tax.

This option will be available where the excess concessional contributions are not greater than $10,000, the contributions relate to the year ended 30 June 2012 or later years and it is the first year in which a breach has occurred.

No Change to Concessional and Non-Concessional Contributions Caps
It should also be noted that there has been no change to the existing concessional superannuation contributions cap of $25,000, or the related transitional cap for those aged 50 or over of $50,000.

This higher transitional cap ceases on 30 June 2012, however the Federal Government has proposed the continuation of this cap from 1 July 2012 for those aged fifty (50) or over who have a superannuation fund balance of less that $500,000.  This proposal is at the consultation stage.

Similarly, the non-concessional contributions cap remains unchanged at $150,000.

Minimum Pension Drawdown Amounts for 2011-2012
The minimum annual pension drawdown amounts have been reduced by 50 per cent in the years ended 30 June 2009, 2010 and 2011.  For the year ended 30 June 2012, this reduction will be at 25 per cent and the minimum drawdown amounts will then return to normal for the year ended 30 June 2013.

This relief is designed to assist such members to recoup capital losses incurred as a result of the global financial crisis, rather than need to realise these investments in order to meet minimum pension payments.

Other Measures

The following measures were also announced that may impact businesses and individuals, including business owners:

­- Under the current Director Penalty Notice, regime the Australian Taxation Office can issue a notice to director(s) of a company in respect of unpaid PAYG Withholding requiring the obligation to be met by the director(s).  The Federal Government proposes to extend this regime to include unpaid superannuation guarantee amounts.

- The Entrepreneurs’ Tax Offset will be abolished from 1 July 2012.

-­ The ability of minors to access the Low Income Tax Offset for unearned income will be removed from 1 July 2011.  This access to the Offset previously allowed minors to reduce their income tax payable on unearned income, such as from dividends and trust distributions, this measure therefore impacts this tax planning opportunity.  Note that income earned by minors from work will not be affected.

- The Federal Government confirmed the extension of the FBT exemption for domestic fly-in fly-out arrangements to Australian residents working in overseas remote areas.

- The commencement date of the Tax Breaks for Green Buildings program has been deferred to 1 July 2012 to enable greater consultation time.

­- The Federal Government announced the intention to introduce a Reportable Taxable Payments system, this would require businesses in the building and construction industry to report annually to the Australian Taxation Office all payments made to contractors in the industry.  In addition, it is then intended to extend this system to the cleaning industry.

- Tax legislation will be amended with effect from 1 July 2011 to disallow income tax deductions being claimed against all government assistance payments.  This measure is in response to a High Court decision which had held that a youth allowance recipient could claim a tax deduction for certain expenses incurred in gaining the payment.

- The Dependent Spouse Tax Offset for taxpayers with a dependent spouse aged less than forty (40) years will be phased out.  However, those with an invalid or permanently disabled spouse, supporting a carer, or those who are eligible for the zone, overseas forces and overseas civilian tax offsets will not be impacted by this change.

- The discount available to students who elect to pay their student contribution under the Higher Education Contribution Scheme (HECS) up-front will be reduced from 20 per cent to 10 per cent.  Further, the bonus on voluntary payments of $500 or more towards the HECS debt will be reduced from 10 per cent to 5 per cent.  These changes will apply from 1 January 2012.

Taxpayers should contact their appropriate adviser should they be impacted or require advice on these announcements.

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South Australia 5061

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