Sent: 19-06-2012 08:57:02
In this issue:
Return to full article list
HomeFree weekly newsletterSelf Managed Super Fund ArticlesContact usLogin
New Income Tax Rates from 1 July
Over the last couple of weeks I have been looking at the income tax cuts to come into play from 1 July '12.
I haven't looked at the additional Family Tax Benefit and other payments that also need to be factored into your modelling. I've also kept away from the Carbon Tax mainly because it seems almost impossible to work out how it will be passed onto the ultimate consumers.
But back to the income tax cuts. Once you hit taxable income of $180,000 the tax cut levels out to a constant amount of money. In other words the more you earn the less it's worth in percentage terms.
At the other end of the scale people on some low incomes - in particular those who earn between $20,000 and $28,000 a year - receive very significant reductions in tax payable especially in percentage terms.
One good feature of the new scales is that the impact of the low income rebate has been largely removed. This means that lower income earners pay lower tax throughout the financial year rather than waiting until they submit their income tax returns.
Taken on its own this is a good reform in my view and I can't understand why this wasn't done many years ago.
Interestingly these reductions - and additional reductions in July 2015 - make superannuation for low income earners even less attractive from a tax perspective.
It's compulsory so it doesn't have to be taxed concessionally might be the argument.
I have to admit to being truly amazing that this situation is allowed to persist. It's equally amazing that no one seems to be pushing to get this changed - perhaps they're just keeping a low profile. Thus far the only substantial response seems to be to increase the taxes paid by higher income earners so the 'system' seems fairer.
But this doesn't take away the fundamental flaw in the system.
You now hit an average 15% tax at a taxable income of about $50,000. Under the old scales it was about $48,000.
On another note the Government needs to be releasing something about the Cooper Review SMSF changes which are meant to be starting on 1 July 2012. Are we going to have to deal with retrospective legislation or will the start date of the measures be amended?
We need an announcement soon please.
Version 6.0 of my SMSF book is now available.
You can see all the changes that have been made between Version 5.1 and 6.0 (the latest edition).
You can look at the contents page at the following link: http://www.atcbiz.com.au/r.php?r=0mjd6ne
For details of the changes made from version 5 to version 6 visit: http://www.atcbiz.com.au/r.php?r=d5xcpch
As you'll see from the list there have been many changes.
Two purchase options are available - once only subscription - $55 inc GST - or an annual subscription will gives you access to all the updates made throughout the year ($120 inc GST). The book can be purchased at the following link: http://www.atcbiz.com.au/r.php?r=5a4agqb
This email is general in nature only and does not constitute or convey specific or professional advice. Legislation changes may occur quickly. Formal advice should be sought before acting in any of the areas discussed. Be aware that the information in these articles may become innaccurate with time. Responsibility is disclaimed for any inaccuracies, errors or omissions. Particular investments are neither invited nor recommended and hence this publication is not "financial product advice" as defined in Section 766B of the above legislation. All expressions of opinion by contributors are published on the basis that they are not to be regarded as expressing the official opinion of any other person or entity unless expressly stated. No responsibility for the accuracy of the opinions or information contained in the contributor's articles is accepted by any other person or entity. Copyright: This publication is copyright. If you wish to reproduce this article you require a license, which can be purchased here, to do so.