Quick Update from the team at Active Financial Services
We invite any client with any outstanding issues relating to the end of the financial year to contact our office to arrange an appointment. There are many changes with the most important being the reduction to the $50,000 superannuation contribution cap for people over age 50. If you are presently salary sacrificing and this salary sacrifice arrangement takes your total superannuation contributions (including employer contributions) over $25,000 please contact our office to discuss.
We look forward to writing to you again soon.
The 2012/13 budget has been described as a very ambitious plan to turn a $44 billion deficit into a $1.5billion surplus. The Federal Government has had to make some serious changes and cutbacks in order to achieve this.
Key points on Superannuation
1. One cap fits all from 1 July 2012 – no higher concessional contributions cap for over 50’s.
2. Reduction of super tax concessions for contributions from very high income earners.
3. SMSF Auditor Registration and competency exams.
Key points on Taxation
- 1. Redundancy payments – reduced tax offset for certain employment termination payments.
2. Phase out the mature age worker’s tax offset for those born on or after 1 July 1957.
3. Medicare levy low income threshold – from 1 July 2012 thresholds will increase.
4. Education expense tax offset – this offset will be replaced by a Schoolkids Bonus.
5. Company tax loss carry back provisions.
6. Limits on living away from home allowances tax concessions and benefits .
7. Increased marginal tax rates for non-resident tax payers.
8. Increase in managed investment trust final withholding tax rate.
9. Removal of CGT tax discount for non-residents – gains accrued after 8 May 2012.
10. Company tax rate cut will not proceed.
11. Interest income tax discount will not proceed.
Key points on Social Security
1. Centrelink – the maximum reserve amount increased for Liquid Asset Waiting Period.
2. Mature age participation – job seeker assistance to help 55+ to re-enter the workforce.
3. Parenting payment - changed eligibility for 1 July 2006 grandfathered recipients.
4. New income support supplement – from 20 March 2013 increased supplements to relieve cost of living pressures.
5. Family Tax Benefit Part A – from 1 January 2013, limited eligibility for FTB Part A.
6. Family Tax Benefit Part A – maximum payment increased.
7. National Disability Insurance Scheme – to be established from 1 January 2013.
8. Portability of Australian Government payments – period paid while travelling overseas reduced from 13 to 6 weeks.
9. Aged care reforms – tighter means test to assess home care & residential care fees.
The above summary highlights the areas that we believe will have the greatest impact on your situation. It does not include all the changes presented in the 2012 Budget and due to the number of changes we will not expand on each individual area. If you would like further information on any of the above please contact your adviser or call our office.
Active's thoughts on the budget
This budget will be the first surplus a Labor government will deliver in 25 years. The surplus, together with our AAA rating from the major rating agencies, our relative low unemployment, economic resilience and high terms of trade and banking strength re-inforces our position relative to the major developed countries and boosts confidence in Australia’s economic and financial position.
While balancing the budget is important, our economy appears to be slowing and the real question remains whether this is the best time to deliver a surplus. The risk is that reducing spending becomes a fiscal drag on the economy and places undue pressure on the RBA when they are attempting to manage borrowing costs, as well as the impact of the high Australian dollar and restoring confidence in our economy.
The budget highlights the governments intention to shift money away from corporates and high income earners to the “battlers” including families, small businesses and the disabled.
The budget is expected to have an adverse affect on clients invested in Australian shares as the promised cuts to the corporate tax rate will not flow through to the investors. Company profits may be negatively affected resulting in lower returns. This together with lower interest rates is expected to disappoint investors, particularly retirees.
On one hand we’ve seen the Labor government express concerns that individuals are not saving enough for their retirement, to the point of proposing increases in SGC from 9% to 12%, but on the other hand they have failed to deliver personal incentives to build wealth for retirement. This will increase the burden for future governments and tax payers to fund the burgeoning number of baby boomers moving into retirement.
There is also an increasing potential for over 50’s who are salary sacrificing to exceed the $25,000 concessional contributions cap, with major tax repercussions.
The % minimum allocated pension payments remain unchanged which will continue to help those clients who can manage on the lower reduced pension amounts. Hopefully, the markets will start improving in the next 12 months which may result in a recovery of retirement capital.
Carbon tax compensation and the adjustments to the tax rates will benefit those earning less than $80,000 pa and those earning less than $20,542 will pay no tax.