FEDERAL BUDGET 2012/2013

The Federal Budget for 2012/13 was tabled by the Treasurer, Wayne Swan last night.  The Budget was designed to return the budget to surplus in 2012/13, coming from a deficit of $34 billion.

Some of the key economic points of the Federal Budget include:

�¡        The projected cash surplus for 2012/13 is expected to come in at $1.5 billion (~0% of GDP). This surplus is expected to grow to $2.0 billion in 2013/14 and $7.5 billion by 2015/16.

�¡        The economy is expected to grow by 3.25% in 2012/13 and 3% per annum for the following three financial years.

�¡        The unemployment rate is expected to rise marginally to 5.50% in 2012/13 and remain there for 2013/14 and then stabilise to 5% for the following two financial years.

As for how the federal Budget will affect you.

Individuals Taxation

�¡        The Government has scrapped the Standard deduction of $500 for work related expenses announced in 2010/11 Federal Budget due to take effect from 1 July 2012.

�¡        The 50% discount of interest income up to $1,000 announced in the 2010/11 Federal Budget due to take effect from 1 July 2012 will not proceed.

�¡        Access to the Living Away From Home Allowance (LAFHA) will be reformed, to limit access and restrict the LAFHA to 12 months per location per individual employee.

�¡        Net medical expenses tax offset will be subject to means testing from 1 July 2012 with changes to the threshold and rebate for those outside the means tested income thresholds.

�¡        Eight dependency tax offsets will be consolidated into a single, non-refundable tax offset from 1 July 2012.

�¡        Mature Age Workers Tax Offset (MAWTO) will be phased out for those born after 1 July 1957.  Those over age 55 in 2011/12, will not be affected as MAWTO will be maintained.

�¡        Medicare levy low income thresholds increased to $19,904 for individuals and $32,743 for families (for 2011/12).

Families/family payments & Age Pension

�¡        ‘Schoolkids bonus’ of $410 each for primary school children or $820 each for high school children will be paid half-yearly with no receipts required and eligibility based on Family Tax Benefit Part A. (Replaces Education Tax Refund).

�¡        Increase to Family Tax Benefit (FTB) Part A from 1 July 2013, of at least $300 per annum or up to $600 per annum in some cases.

�¡        Age pension increases of up to $338 for singles and $255 each for couples from May 2012.

Superannuation

�¡        High income earners, those with adjusted taxable income over $300,000 will be subject to 30% contributions tax on all concessional (pre-tax) contributions from 1 July 2012.

�¡        The previously announced measure of a higher concessional contribution cap for individuals over age 50 with superannuation balances below $500,000 has been deferred until 1 July 2014. This means that from 1 July 2012 to 1 July 2014 those over age 50 will have a concessional contribution cap of $25,000.

�¡        As previously announced, the Super Guarantee (SG) progressively increasing from 9 to 12 percent from 1 July 2013 to 1 July 2019.

�¡        As previously announced, people earning up to $37,000 will receive a refund of the contributions tax paid on their 9% Superannuation Guarantee contributions. This will be refunded to their superannuation fund.

�¡        The maximum age limit for Superannuation Guarantee (SG) contributions will be abolished (this is currently age 70).This means that anyone who is employed will be eligible to receive 9% SG contributions regardless of age.

�¡        From 1 July 2012 there will be changes to the Eligible Termination Payment (ETP) tax offset.

Capital Gains Tax

�¡        The 50% Capital Gains Tax (CGT) discount has been abolished for non-residents, except where the non-resident chooses to obtain a market valuation of assets as at 8 May 2012.

�¡        The personal income tax rates and thresholds for non-residents will be adjusted.

�¡        Managed investment trusts final withholding tax for non-residents will increase from 7.5% to 15% from 1 July 2012.

Small Business

�¡        Company tax rate cut of 1% due to take effect from 1 July 2013 for big business and 1 July 2012 for small business will be scrapped.

�¡        Companies will be able to carry-back up to $1,000,000 in tax losses in 2012/13 to offset against tax paid in 2011/12. From 2013/14 tax losses can be carried back and offset against tax paid up to two years earlier.

�¡        Immediate write-off of assets valued at less than $6,500 from 1 July 2012 and assets valued at greater than $6,500 can be pooled for depreciation purposes.

�¡        The first $5,000 of a new or used car purchased from 1 July 2012 can be immediately written off.

�¡        $1,000 jobs bonus for employers who employ a mature aged worker for more than three months.

Source: Morgan Stanley Smith Barney Australia Pty Ltd