From a superannuation and investment perspective there were no big surprises in the Budget.
The faster than expected return of the Budget to surplus, three years ahead of schedule in 2012-13, is good news for all investors. However, the return to surplus is predicated on a continuation of the resources boom and economic growth in China.
The good news from last night’s Budget was:
- A new 50% discount on interest income up to $1,000 from 1 July 2011.
- Enhancements to First Home Owners Savers Accounts.
- A standard work related expenses deduction of $500 in 2012-13, increasing to $1,000 in 2013-14 and beyond.
- Already legislated tax cuts to remain in effect from 1 July 2010.
- An increase to the deductibility of capital protected borrowings.
The bad news from last night’s Budget was:
- Child care rebate capped from 1 July 2010.
- Government Co-Contribution Scheme permanently reduced.
- Government Co-Contribution Scheme indexation of income threshold frozen for 2 years.
It is important to remember that many items in the Budget cannot take effect until legislation is passed. With this year being an election year, this is something that may prove difficult in the current political environment.
Henry Review
The Federal Budget also confirmed the Governments position in relation to the recently released Henry Review and in particular:
- Increase of the Superannuation Guarantee from 9% to 12% commencing 1 July 2013.
- Raising the Superannuation Guarantee eligibility age from 75 to 70.
- Introducing a 15% low income earners Government contribution capped at $500, effectively refunding contributions tax on up to $3,330 of concessional contributions.
- Retaining the $50,000 concessional cap for those aged 50 or over who have super balances of less than $500,000.
- Reducing the standard company tax rate to 29% from 1 July 2013 then 28% from 1 July 2014.
- Reducing the small business company tax rate to 28% from 1 July 2012.
- Allowing small businesses to immediately write off assets valued at under $5,000 and other assets in a single 30% rate depreciation pool.
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