Budget changes affect small businesses
50% discount on interest income abandoned
Proposed in the 2010-2011 Federal Budget and due to commence 1 July 2012 was a 50 per cent discount available to individuals for interest income earned up to $1,000 then lowered to $500. In the 2011-12 budget it was announced that this measure will not proceed.
Standard deduction for work related expenses abandoned
Also proposed in the 2010-2011 Federal Budget was a standard deduction for individuals of $500 from 1 July 2012 increasing to $1000 from 1 July 2013. This measure will also not be proceeding.
Changes to the medical expenses tax offset
Currently, the medical expenses tax offset (NMETO) is available where net medical expenses exceed $2,060 for the
2011–12 income year.
From 1 July 2012, for singles with an adjusted taxable income of more than $84,000, and for couple or families with an adjusted taxable income of more than $168,000, the net medical expenses tax offset reduces from 20 per cent to 10 per cent of net medical expenses over $5,000.
Concessional Contributions Cap for those aged 50 and over
For the next two years commencing on 1 July 2012 the concessional cap will be $25,000 irrespective of a person’s age.
Individuals (50 years +) with low superannuation balances under $500,000 are expected to have a concessional cap of $55,000 in the year commencing 1 July 2014 assuming the concessional cap increases to $30,000 due to indexation.
Reminder
Those individuals salary sacrificing superannuation should review their salary sacrifice agreement to ensure that they do not exceed their concessional caps for the year commencing 1 July 2012.
Removal of CGT discounts for non-residents
The Government will remove the 50 per cent capital gains tax (CGT) discount for non-residents on capital gains accrued after 7.30 pm (AEST) on 8 May 2012.
The CGT discount will remain available for capital gains accrued prior to this time provided that they obtain a market valuation of assets as at 8 May 2012.
Company loss carry-back
The Government will allow companies to carry-back tax losses of up to $1 million to receive a refund against tax previously paid. A one year loss carry-back will apply in 2012/13, where tax losses incurred in that year can be carried back and offset against tax paid in 2011/12. For 2013/14 and later years, tax losses can be carried back and offset against tax paid up to two years earlier.
It will apply to their revenue losses only and will be subject to integrity rules, and limited to a company's franking account balance.
Company tax rate reductions will not to proceed
The Government will not proceed with the measure to lower the company tax rate to 29 per cent for small business from the 2012–13 income year, and companies generally from the 2013–14 income year.
Fringe benefits tax — reform of living away from home allowances and benefits
The Government will further limit the tax concession for living away from home allowances by:
- limiting access to the tax concession to employees who maintain a home for their own use in Australia, that they are living away from for work; and
- providing the tax concession for a maximum period of 12 months with respect to an individual employee for any particular work location.
This will apply from 1 July 2012 for arrangements entered into after 7.30pm (AEST) on 8 May 2012 and from 1 July 2014 for arrangements entered into prior to that time.
The reforms will not apply to:
- tax concessions for ‘fly-in fly-out’ arrangements; or
- tax treatment of travel and meal allowances
Superannuation contributions tax for high income earners
Individuals whose adjusted taxable income (ATI) is more than $300,000 will have their concessional contributions taxed in the fund at 30 per cent.
Individuals whose ATI is $300,000 or less will continue to have their concessional contributions taxed in the fund at 15 per cent.
Those individuals whose ATI exceeds $300,000 solely because of the inclusion of concessional superannuation contributions in the calculation of their ATI will have their contributions taxed at the rate of 30 per cent only on the amount that has caused the ATI to exceed $300,000.
For further information about these changes and how they might affect you, please contact us.