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The tax changes in the Budget contained few surprises with many of the small business changes already announced as part of the Henry Tax Review. The major personal, superannuation and small business tax changes are:

Personal  

  • An optional standard deduction of $500 will be allowed for work related expenses and cost of managing tax affairs to commence in the 2012/13 year, increasing to $1,000 from the 2013/14 year onwards. There is no announcement in the Budget about removing the requirement to lodge a tax return by persons with "simple" tax affairs.
  • Raising the effective tax-free threshold to $16,000 from 1 July 2010 by increasing the Low Income Tax Offset from $1,350 to $1,500.
  • From the 2009/10 year, the Medicare Levy low-income threshold will increase to $18,488 (up from $17,794) for singles, and to $31,196 (up from $30,025) for couples. For families, the additional amount of threshold for each dependent child or student will also be increased to $2,865 (up from $2,757).
  • The threshold above which a taxpayer may claim the net medical expenses tax offset of 20% will be indexed and increase from $1,500 to $2,000 from 1 July 2010. The first indexation adjustment to the threshold will occur on 1 July 2011. 
  • From 1 July 2011, the Government will provide individuals with a 50% tax discount on up to $1,000 of interest earned from bank, building society or credit union accounts, as well as bonds and debentures.

 Small businesses

 A small business is defined as having a turnover of less than $2 million GST exclusive. The Government didn’t adopt the Henry proposal to increase this threshold to $5 million.

  • From 1 July 2012, small businesses who account for GST on a cash basis will be allowed to claim input tax credits upfront in relation to hire purchase arrangements. This change will significantly assist those businesses that have been forced into higher cost chattel mortgages following the introduction of the GST and will also reduce compliance costs.
  • The ATO is to receive extra funding to focus on businesses who engage in cash transactions to avoid their income tax and GST obligations.
  • The company tax rate for small businesses will reduce to 28% from the 2012/13 year, but will be phased in for other companies (29% for 2013/14 and 28% from 2014/15. This change discriminates in favour of businesses operating through a company structure.  
  • From 1 July 2012, small businesses will be entitled to an immediate deduction for assets costing less than $5,000 GST exclusive (currently $1,000) and all other assets (excluding buildings) can be written off in a single depreciation pool at a rate of 30%.

Superannuation

  • From 1 July 2010, the ATO will be able to exercise a discretion regarding the imposition of excess contributions tax before an assessment is issued. This has become a major issue since the Government halved the concessional contribution caps to $50,000 and $25,000 from 1 July 2009.  
  • From 1 July 2012, individuals aged 50 and over with super balances of less than $500,000 will have their concessional superannuation cap maintained at the $50,000 level.
  • The superannuation guarantee age limit will be increased from 70 to 75 from 1 July 2013.
  • The superannuation guarantee rate will increase to 12% by 2019/20 (to be phased in from 1 July 2013).
  • From 1 July 2012, the Government will make an annual superannuation contribution of up to $500 for workers having an adjusted taxable of up to $37,000. This will offset the 15% tax that is paid on super guarantee contributions made on behalf of these workers.