Income Tax rates in Australia have been falling almost every year for the last 15 years. The top...
Updates and highlights of the 2011 Federal Budget specifically in terms of how it affects small business and individual taxpayers. There were no major changes that affect most small businesses.
Many of the announcements had been made already like the reduction of company tax to 29%.
Personal Tax
There were minimal changes in the personal tax context.
Low income tax offset for minors
From 1 July 2011, low income tax offset will no longer be available to minors to reduce income tax payable on their non-work income, such as dividends and trust distributions. This effectively pegs back the tax free non-work income for a minor to $416. However, low income tax offset is still available for minors to reduce their work income
Medicare levy threshold increases
From the 2010-11 income year, the Medicare levy low income threshold will increase to $31,789 for couples (up from $31,196), and to $18,839 for singles (up from $18,488).
Dependent Spouse tax offset phases out
From 1 July 2011 taxpayers with a dependent spouse born on or after 1 July 1971(i.e. who is less than 40 years old as at 1 July 2011) will no longer be eligible for the dependent spouse tax offset. This measure does not affect dependent spouses with children because they are eligible for Family Tax Benefit Part B rather than the dependent spouse tax offset
Family tax benefit increases
From 1 July 2011, Family tax benefit (FTB) part A will increase by up to $4,208 per year for families with teenagers to keep their teenagers in school or vocational training. Families in receipt of FBT part A will be eligible for an advance of up to 7.5%, up to a maximum of $1,000 for their annual FTB entitlement.
Deductions against government assistance payments to be disallowed
From 1 July 2011 the tax law will be amended to prevent deductions being claimed against all government assistance payments, in response to the High Court decision in FCT v Anstis.
Superannuation
Superannuation contributions
There were no changes to the superannuation contribution caps for the 2011-12 income year.
Minimum pension payment relief phases out
The minimum pension withdrawal relief provided over the past three years will be phased out. The following table shows the relevant percentage factor based on member’s age
| Minimum payment % on account balance | ||
| Member Age | 2011/12 income year | 2012/2013 income year |
| Under 65 years | 3.00% | 4% |
| 65-74 years | 3.75% | 5% |
| 75-79 years | 4.50% | 6% |
| 80-84 years | 5.25% | 7% |
| 85-89 years | 6.75% | 9% |
| 90-94 years | 8.25% | 11% |
| 95 years or more | 10.50% | 14% |
Reform of excess contribution regime
From 1 July 2011, individuals who breach the concessional contribution caps by up to $10,000 can request the excess amount to be refunded on a once only basis. Personal marginal tax rates will apply in lieu of the potentially higher excess contributions tax rate, except for when the excess contributions are non-concessional contributions and do not cause a breach of the non-concessional contribution cap.
Small Business Tax Breaks
Reduced corporate tax rate
From 2012-13 income year, incorporated small business entitles to have reduced corporate tax rate of 29%
Enhanced write-offs for depreciable assets
From 2012-13 income year, small business will be entitled to claim an immediate write-off of all assets acquired on or after 1 July 2012 and valued at under $5,000. All other depreciable assets can be allocated to a single depreciation pool and depreciated at a rate of 30%.
Accelerated depreciation for motor vehicles
From 2012-13 income year, small business is entitled to claim an immediate $5,000 write-off of the cost of any motor vehicle purchased on or after 1 July 2012. The remainder of the cost value can be transferred into the general small business depreciation pool.
Removal of entrepreneurs’ tax offset
The entrepreneurs’ tax offset will be removed from the 2012-13 income year.
Lower PAYG instalments
From 2011-12 income year, Pay As You Go (PAYG) instalments for small business will be set at 4% above the small business taxable income for the previous year, which is half the statutory rate applied in prior years.
Fringe Benefit Tax
Reform of car fringe benefit
For Fringe Benefit Tax statutory rate method, a single rate of 20% applies to new vehicle contracts entered into after 10 May 2011 and will be phased in over four years.