Know someone who's working overseas temporarily? Or someone who's about to retire and apply for the Age Pension? Or are you currently salary sacrificing to your Super? The 2009 Australian Federal Budget may have implications that could affect you or someone you know. For the 'time-poor', we've summarised it as succinctly for you as possible in each of the key areas.

Tax

• The calculation of the private health insurance rebate just got a lot more complicated. Depending on your age, how much you earn, and how much your partner earns if you and your partner have a policy together, you could receive a 30%, 20%, 10% or 0% rebate. Take care to check this item when lodging your returns.
• For those who don’t have private health insurance, the Medicare Levy thresholds increased slightly and the surcharge has been increased to above 1% 1% at the mo for taxpayers earning above $120,000pa.
• Taxpayers with ‘adjusted taxable incomes’ over $250,000 will have excess deduction quarantined. Seems a few too many people were claiming losses from non-commercial hobby farms.
• Many Aussies that travel overseas to work assume that they are non-tax residents as soon as they land overseas, but this is often not the case. Australian ‘tax residents’ who are working overseas will have to declare their foreign employment income on their tax return here in Australia but they do get a foreign tax offset for foreign tax paid. This is a complicated issue which shouldn’t be ignored (which is so easy for a traveler to do…!). It can come back to bite you if you get audited.
• Employees who qualify for discounted shares and options as part of an employee share scheme can no longer defer taxation on the discount to a later time. The $1,000 upfront concession is now limited to employees with a taxable income less than $60,000pa.
• Limited capital gains tax relief has been granted on assets transferred between fixed trusts.

Superannuation

• The concessional contribution cap will be reduced from $50,000 to $25,000 from 1 July 2009 for those under the age of 50; and from $100,000 to $50,000 for those over the age of 50. The “concessional cap” includes superannuation guarantee contributions and salary sacrifice contributions. So for example, if you’re earning $100,000pa as an employee, your employer will contribute $9,000 so there’s only room for you to salary sacrifice $16,000 to super ($41,000 if you’re over 50 years of age). Non-concessional contributions (ones made from after tax money, which you aren't claiming a tax deduction on) remain unchanged.
• The Government superannuation co-contribution matching rate has been reduced from 150% to 100%. Still the best investment return going around (except you cannot access the funds until preservation age).
• The minimum amount that must be drawn from account-based pensions (formerly allocated pensions) will again be halved for 2009/2010, enabling investors to preserve capital in their super if they need to. This may also be of interest to people running transition to retirement (TTR) pensions and then contributing the money back into super.
• The Australian Future Tax System (AFTS) Report was launched. Some findings from the report have been adopted (lowering concessional caps and increasing the Age Pension age), but others that haven’t been adopted include retaining SGC at 9%, increasing the age at which superannuation can be accessed to 67 years and providing incentives for people to work beyond retirement age.
• A scheme is being developed to allow taxpayers to transfer benefits between an Australian superannuation fund and the New Zealand KiwiSaver fund.

Business

• A bonus deduction of 50% is available for small businesses that spend more than $1,000 and large businesses that spend more than $10,000 on ‘eligible’ assets between 13 December 2008 and 31 December 2009, ready for use by 31 December 2010. Eligible assets are new, tangible, depreciating assets such as computers, working tools and office equipment, cars (whereas software, rights, stock, land and capital works are ineligible). The net effect of this is essentially a discount of approximately 0-23.5%, depending on your tax rate.
• The Government is tightening the rules around benefits provided by a private company to shareholders or associates such as access to real estate, cars, boats and chattels. Any use must be on a commercial, arm’s length basis.

Social security

• The Pension Bonus Scheme will close to new entrants from 20 September 2009.
• The income test taper rate will increase from a 40 cent reduction to a 50 cent reduction in pension per dollar of income over the free thresholds.
• The qualifying age for the Age Pension and Seniors Health Care Card will increase to 67 years of age from 2023, transitioning from 2017.
• The Age Pension increased by $32 per week for single pensioners on the full rate

Family

• The Government will provide ‘eligible’ parents with up to 18 weeks of leave at $543 per week as funded parental leave (maternity leave). To be eligible, the ‘primary carer’ must have earned less than $150,000, worked at least 330hrs in the previous 10 months and worked continuously for at least 10 of the 13 months before the expected date of birth or adoption.
• Parents who receive the Paid Parental Leave will not receive the Baby Bonus, except in the case of multiple births.
• Family Tax Benefit Part A will now be indexed by inflation.

Do any of these items apply to you? Unsure how it may affect your financial circumstances?

Contact us to organise a Discovery Interview. We will Discover what drives you, determine where you want to be, assess where you are now and project manage your plan to take you there.



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