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WHK Special Budget Bulletin - Key
points of interest
The days of announcing big tax
reform or unexpected expenditure
shocks on budget night appear to be
a thing of the past, with Wayne Swan
again opting for a conservative
approach in this year's Federal
Budget. The "back-to-work-budget"
has as its centrepiece employment
participation in a "patchwork
economy" all aimed at returning the
budget to surplus in 2012/13.
According to Darryl Gobbett,
Chief Economist at WHK Group, whilst
the budget is conservative the
Australian economy is still in good
shape;
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Private sector capital
markets and profit
conditions continue to
improve |
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$A highest since the
float |
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Banking system doing
well and Federal
Government debt
relatively low
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Business investment and
employment at record
highs |
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Unemployment rate lowest
since 1970s, skill
shortages, boomer
retirements coming
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Strong population growth
and high housing prices
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Profits back up to 2007
levels, households are
saving again
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Emerging economies are
growing very strongly |
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- Inflation,
strengthening
currencies, rising
interest rates |
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Commodity prices
globally at record highs |
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In this special WHK Budget
Bulletin we highlight a few of the
budget announcements that might be
relevant for you and your business.
As always, please speak with your
adviser regarding your individual
circumstances.
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Better advice
WHK has access to world wide best practice
that we combine with strong local knowledge -
giving our clients advice they can rely on.
For a better life.
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WHK - Helping you
through the budget maze |
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Instant Tax
Write-Off for Car Purchases for Small Business
From 1 July 2012, the
Government will provide Australian small
businesses with:
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an instant tax write-off of the
first $5,000 of any motor vehicle
purchased (as a replacement of the
Entrepreneurs Tax Offset) which will
add to the already announced
increase of the immediate write off
of assets valued at under $5,000,
from current $1,000); and |
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a write-off of all other assets
(except buildings) in a single
depreciation pool at a rate of 30%.
Currently, small businesses allocate
assets to two different depreciation
pools, with two different
depreciation rates (30% and 5%). |
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These measures are proposed to be available to
all small businesses*, including sole traders
and businesses operating through trusts,
partnerships and companies.
*A small business is generally based on a $2 m
turnover threshold.
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Low Income Tax Offset Changes
Government crackdown on the use of income
streaming to children to minimise tax.
The government has removed the low-income
tax offset for children younger than 18 for
unearned income. In addition to the impact on
trust distributions to minors, clients that do
not operate through trusts, and instead have
income producing assets in the child's name will
be disadvantaged by these changes. For instance,
a child owning shares in his/her own name and
previously utilising low-income tax offset will
probably need to consider restructuring and
bearing a tax sting in the year of the
restructure. Speak to your adviser about your
specific circumstances
Summary
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Minors no longer entitled to Low
Income Tax Offset on unearned income
(dividends, interest, trust
distributions etc) effective 1/7/11 |
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Income earned from income by minors
unaffected
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Unearned income of minors who are
orphans or disabled, as well as
compensation payments and
inheritances unaffected |
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Streamlining of Fringe Benefits Tax (FBT) for
Salary-Packaged Cars
The government proposes to introduce a
flat rate of 20% for valuing the FBT on salary
packaged cars, replacing the 4 step statutory
formulae currently in place. Currently,
different statutory rates apply depending on the
level of mileage driven so that a lesser rate
applies the higher the distance travelled.
Clients that are involved with salary
sacrifice arrangements will need to review their
affairs in light of this change. It seems that
for those that do a significant amount of
business kilometres, adopting the log book
method will be more attractive than ever.
A single rate of 20 per cent will:
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increase the tax concession provided
for vehicles driven less than 15,000
kilometres a year;
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maintain the current tax concession
provided for vehicles driven between
15,000 and 25,000 kilometres a year;
and
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decrease the tax concession provided
for vehicles driven more than 25,000
kilometres a year.
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Accordingly, for all clients that
currently utilise a salary sacrifice arrangement
in relation to their car and have been
considering upgrading to a newer model, provided
they drive less than 25,000km in a year, they
will be no worse off (and possibly better off)
under the new arrangements.
Click for table comparison
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Farm Management Deposits & Natural Disasters
As
part of its response to the Queensland and
Victoria flooding earlier this year, the
Government announced measures in which it will
allow primary producers affected by natural
disasters to withdraw their farm management
deposits (FMDs) within 12 months of making a
deposit while retaining concessional tax
treatment under the scheme. This aligns the
treatment of farmers suffering from other
natural disasters to those that have been
affected by severe drought.
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Other Points of Interest
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No deductions against government
assistance payments (Anstis decision
overturned) |
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The High Court decision in the case of Anstis,
provided that it was possible to claim
deductions against certain government benefits.
The government has now announced that it will
legislate to prevent deductions being claimed
against all government assistance payments from
1 July 2011. This change is not retrospective.
As the Anstis case was concerned with a student
in receipt of Youth Allowance, the Tax Office
has indicated that it will allow an automatic
deduction of $550 from the 2006-07 to the
2009-10 income years for eligible students that
were also in receipt of Youth Allowance. In
addition, the Tax Office will allow potentially
higher claims for those eligible taxpayers who
can prove their expenses
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Dependant spouse rebates to be
phased out for under 40 year olds |
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From 1 July 2011, the Dependant Spouse
Tax Offset will be phased out for spouses under
age 40 of years (i.e born on or after 1 July
1971). Currently, the maximum claimable spouse
tax offset is $2,243. Those with invalid
dependent spouses and selected other groups will
not be affected.
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Small business tax concessions
amendments |
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The Government will amend the small
business tax concessions so that trusts will not
be able to avoid being treated as connected
entities for the purpose of testing eligibility
for the concessions on the basis that the trusts
do not own assets for their own benefit. These
changes will also ensure that some small
businesses will be able to access the small
business CGT concessions because the changes
will make their business assets active.
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A Solution to the Excess Contributions Tax
Problem
One of the big ticket items that had been
generating a great deal of publicity prior to
the budget was the excess contributions tax
problem. Eligible individuals that breach the
concessional contributions cap by up to $10,000
will now have an option to request that these
contributions be refunded to them and taxed at
their marginal rate.
This will only apply to first time
breaches from 1 July 2011.
Details regarding the way in which this
change will operate await government
consultation with the superannuation industry.
Other Important
Superannuation Changes
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Port
Douglas Office:
21-23 Warner Street,
Port Douglas Qld 4877
Ph: 1300 852 044
Fx: (07) 4099 4344
Cairns Office:
232-240 Mulgrave Road,
Cairns Qld 4870
Ph: (07) 4052 3222
Fx: (07) 4051 8827
Townsville Office:
22 Walker Street,
Townsville Qld 4810
Ph: (07) 4722
9555
Fx: (07) 4722 9599 |
Kirwan
Office:
73 Thuringowa Drive,
Kirwan QLD 4817
Ph: (07) 4723 2777 Fx: (07) 4723 0921
Charters Towers
Office:
28 Bow Street, Charters Towers Qld 4820
Ph: (07) 4788 2900 Fx: (07) 4787 4169
Hughenden
Office:
29 Brodie Street, Hughenden Qld 4821
Ph: (07) 4741 1100 Fx: (07) 4741 1211 |
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