Website I Contact us I Send to a friend BUDGET 2010/11
Budget time for the 2010/2011 financial year is already upon us! Not only is the release of the
federal budget a good insight into what lies ahead, it is also a good
time to start putting together your own budgets - whether they be business or
personal.Similar to last weeks announcements as part of the Henry Review, many of the
measures will not commence for a number of years or were already leaked to the
media. For anyone wishing to look back at last weeks Henry Review
announcements, please click here.The key highlights that you need to know are detailed below:
Personal Taxation
1. 50% taxation discount on interest income
From 1 July 2011, there will be a 50% tax discount on interest income earned, up to
$1,000. click here.2. $500 standard deduction on personal income tax returns
From 1 July 2012, individual taxpayers will have the choice of claiming expenses as
they currently do, or choosing to claim a standard deduction of $500 for work
related expenses and tax agent fees. The standard deduction will increase to $1,000
commencing on 1 July 2013.3. Personal tax rates to change at 1 July 2010
The tax rates for the years ended 30 June 2010 and 30 June 2011 remain unchanged
but will increase as already legislated from 1 July 2010. Click here.4. First Home Savers Account Scheme (FHSA)
The FHSA scheme allows taxpayers to set aside money in a FHSA to apply towards
the purchase of their home. Under the current rules, funds must be retained in the
FHSA for four years before the taxpayer is able to apply the funds to the purchase of
a home. The Government has proposed to reduce this qualifying period so that the
funds can be applied against approved mortgages, however no further details
have been released. Click here.5. Increase in medicare levy thresholds
From 1 July 2009, the amount of income that can be earned before medicare
becomes payable has increased. Click here for the new thresholds.6. Medical expenses offset
For the year ended 30 June 2010, a tax offset can be claimed where “net medical
expenses” exceed $1,500. Net medical expenses means total medical expenses
(such as fees paid to doctors, dentists, and for medication) less refunds from
medicare and private health insurance.For the year ended 30 June 2011, net medical expenses must now exceed $2,000 in
order to claim the offset.7. Child care rebate
The annual child care rebate will be capped at 7,500 per child, down from the
current cap of $7,778.Superannuation
8. Government co-contribution reduced
Subject to income tests, the government will match contributions up to $1,000
made by individuals into superannuation. Previously, the government contribution
was $1.50 for every dollar of contributions. From 1 July 2009, the government
contribution has now been reduced so that the government will only match
contributions dollar for dollar. For the income thresholds, click here.GST
9. Additional funding to the Australian Taxation Office for GST reviews
The Government has provided additional funding to the ATO for GST compliance
enforcement. They believe there is significant non-compliance in the areas of
fraudulent refunds, under-reporting of GST liabilities, non-lodgement of returns and
non-payment of debts. This measure is expected to improve the revenue base by
$2.7 billion. Click here.10. Simplifying the margin scheme rules
The margin scheme, applicable to the sale of land and buildings, is one of the most
complex areas of GST faced by those involved in property transactions, with
complex legislation, and decisions from cases that the ATO has taken to court.The Government has proposed to simplify the rules, with the changes intended to
apply from 1 July 2012. No further information is available.11. Simplifying the rules for financial supplies
The Government has proposed to simplify the rules relating to financial supplies from
1 July 2012. Two of the more important changes are:
(i) increasing the financial supplies threshold from $50,000 to $150,000
(ii) allowing input tax credits on the purchase of assets under a hire purchase
agreement to be claimed up-front at the time of acquisition, regardless of whether
a taxpayer accounts for GST on a cash or accruals basis.12. GST and Cross border transactions
The GST system will be amended to reduce the number of non-residents unnecessarily
caught up in the Australian GST system. This will be done by limiting which supplies
are “connected with Australia” for non-residents, extending GST-free rules, expanding
reverse charge provisions and removing the need for certain non-residents to
register. This will apply from 1 July 2012.Business taxation
13. Earnout arrangements on the sale of a business
It is common for the sale price of a business to be determined in part by reference to
the future earnings of the business. This may result in an adjustment that increases or
decreases the sale price, and these are often referred to as earnout rights.The earnout right is currently treated as a separate asset for capital gains tax
purposes. Legislation will be introduced to treat any adjustment to the sale price
under the earnout right as relating to the underlying asset, being the business sold.
This measure should reduce complexity of having to deal with two separate CGT
assets. This will come into force on the day that the legislation receives royal assent
with transitional measures from 17 October 2007.14. Capital protected borrowings
Interest deductions may be denied on certain capital protected borrowings. The
deduction is currently determined by reference to the Reserve Bank of Australia’s
standard variable housing loan rate. This rate will now be increased by 100 base
points over and above the existing standard variable housing loan indicator.15. Registration of business names
The current system of having to register a Business name in each State is intended to
be replaced with a single national system. This will overcome the current problem
of a business name needing to be separately registered in each State. This will not
affect any registered company names as they have an existing national registration
system governed by ASIC.16. Consolidated groups
Several changes have been made, affecting tax sharing agreements, recovery of
Pay As You Go liabilities, and how to treat non-membership equity interests.17. Additional Australian Taxation Office activity in the cash economy
The Government has allocated additional funds for the ATO to increase compliance
activity against the cash economy. This is expected to generate revenue of $400
million over the next four years.Now that the Henry Review and Budget have been released what else can we
expect this year?With the Henry Review announcements already released in two tranches as part of
last weeks announcements and with some new ones in the budget, we can expect
further information to be released as the election campaign gets underway. Many
of the Henry Review recommendations are still to be officially commented on either
in the positive or negative. We believe that it is likely that these particular items will
be announced during the year. These include a number of superannuation related
measures recommended in the Henry Review that have not yet been released.We will keep you informed of any further tax reform developments as they develop.
In the meantime, if you have any questions or concerns about how these proposals
will impact your specific circumstances, please phone your usual contact to discuss.
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Past Newsletters
Bean Thinking... Tips for businesses affected by the floods Bean Thinking... Budget 2010/11 Bean Thinking... Henry Review Bean Thinking... Sustainable Competitive Advantage Bean Thinking... 7 Deadly Wastes Bean Thinking... What-ifs Bean Thinking Tax... ATO Crackdown on Tax Debts! Bean Thinking Tax... R & D Tax Concessions Bean Thinking Tax... Recovery of Land Tax Bean Thinking Tax... Last Minute Tax Planning Tips Bean Thinking Super... Avoid Excess Super Contributions Bean Thinking Real Estate... Changes to Comission Structures Bean Thinking Real Estate... Benchmarks! Bean Thinking Real Estate... Purple Cows
Past Presentations
Bean Thinking Real Estate... Good, Bad & Ugly: Real Estate Business Bean Thinking Super... Super + Borrowing = ? Bean Thinking Super... Borrowing inside Super "How does it work?" Bean Thinking... Goals & Strategies for 2010/11 Bean Thinking... Tax Time for Unit Owners
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