In Danny’s post earlier this week, we laid a few bets on what we expected to see happening in last night’s budget. There really weren’t too many surprises, but a few changes that are could affect you might include:
- The effective tax-free threshold will be raised to $16,000 from 2010-2011 with an increase in the low-income offset.
- There will also be lower tax on savings, with 50% discount on tax on interest income up to $1,000. This could save you up to about $230 if you’re on the top tax bracket and have more than about $17k or more in savings.
- There will be a standard deduction for individuals with simple tax returns, meaning that it won’t be necessary to lodge a tax return if you simply get income from wages, interest and dividends. This deduction will be $500 from 2012 and $1000 from the 2013. Most of you, of course, have slightly more complex affairs so we won’t be out of a job just yet!
- The government plans to eventually increase the super guarantee from your employers to 12%, from 9%.
- From July 1st 2012, the government will contribute up to $500 to offset contributions tax for workers on incomes up to $37000.
- From 1st July 2012, allow catch up contributions by older workers with super balances less than $500,000 of up to $50,000 a year.
- The company tax rate will be cut to 29% from 2013-2014, and to 28% from 2014-2015.
- Companies purchasing assets under $5000 will be able to claim an instant write-off for those assets from 1st July 2012.
So, small business has received some good benefits, but the increased super guarantee may affect employment rates as it gets closer. Nothing much changes for property investors and that tax break on interest income will yield a maximum of about $232 for high income earners with substantial savings.
Other items of potential interest include:
- The forecast budget for the 2010-2011 is $40.8 billion, which is $16.3 billion less than expected one year ago. The budget is expected to return to surplus in 3 years.
- Childcare benefits are being capped, at a reduced rate of $7,500 and this won’t change for at least four years even if childcare costs increase.
- The first home buyer saving accounts are now a little more attractive, as funds can be withdrawn early to pay down a mortgage if you manage to buy a home sooner than expected.
- The super profits tax on mining companies, flagged in the Henry Review, was included and is a large part of the reason for such a strong turnaround in the budget figures. We’re still not convinced that it’s a good idea though and the sharemarket seems to agree.
For more information please don’t hesitate to call us, or visit www.budget.gov.au.
Curious about the “Companies purchasing assets under $5000” – does this cover deprecable assets like computer equipment as well? So if I buy a new computer for $3000, does the cost get instantly written off, or does it fall under the current deprecable assets rule where the cost is offset a little bit at a time each year?
Hi Jonathon,
For small businesses, yes, it will mean that assets like computers can be written off in full at the time of purchase. That will give some great tax benefits and ideally, will encourage more spending in the process. That said, it’s still just a proposal at this point, so let’s not get too excited just yet…
July 2012 is a long way off too for planning purchases – thanks for the clarifications James!