Australia: Budget Holds Few Changes
The measures announced in Australia’s Federal Budget, largely took effect on 1 July 2010. Australia’s Treasurer, Wayne Swan, handed down the Federal Budget on 11 May 2009. The Budget included some measures that may impact individuals – including those on international assignments – and multinational employers.
For a complete summary of the Budget, see the Web page for the “2010 Federal Budget Brief” published by the Australian member firm of KPMG International. Also, click here for additional budget analysis on the Australian firm’s Web site.
(All dollar figures expressed are Australian dollars.)
Personal Income Tax Rates
As anticipated, the Budget confirmed the following, already enacted, personal tax rates and thresholds which will apply from 1 July 2010.
The Australian Taxation Office recently reminded employers that new personal income tax thresholds apply from 1 July 2010, and that they should use the new personal income tax rates from 1 July 2010, when withholding tax from their employees.
Personal Tax Offsets, Rebates, and Thresholds
The government had also announced in its Budget the following related adjustments to personal income tax offsets and rebates from 1 July 2010:
• Confirmation of the previously announced increase in the maximum amount of the low-income tax offset (LITO) from the current $1,350 to $1,500.
• An increase in the threshold for the 20-percent net medical expenses tax offset from $1,500 to $2,000.
• An increase in the Medicare Levy low-income threshold to $18,488, for individuals and $31,196, for individuals who are members of a family.
• The government will cap the child care rebate for out-of-pocket child-care costs at 50 percent of costs up to $7,500.
There will be no indexation of the cap for a further four years.
The government’s Budget contained a proposal to introduce a standard deduction for work-related expenses and for the cost of managing tax affairs. For 2012-13, the standard deduction would be $500, increasing to $1,000 from 2013-14 onwards. Taxpayers with deductible expenses greater than the standard deduction amount would be able to continue to claim their actual expenses instead. The government has indicated that it sees this measure as a further step towards pre-filling of personal tax returns, complementing the use of data obtained directly from employers and financial institutions.
Tax-Preferred Savings Accounts
It is proposed that from 1 July 2011, a 50-percent tax discount will be available on up to $1,000 interest earned by individuals, including interest earned on deposits held in authorized deposit taking institutions, bonds, debentures, and annuity products.
This discount will be available for interest income earned directly, as well as indirectly, such as via a trust or managed investments scheme.
Consultation on this measure will occur during 2010-2011.
First-Time Home Savers Accounts
Minor changes to the First Home Savers Account (FHSA) scheme have been announced to increase flexibility for first home buyers. It is proposed that savings in a FHSA can now be transferred to an approved mortgage after the end of a minimum qualifying period, rather than being paid into a superannuation account to remain in a concessionally taxed environment.
In the FutureA number of government-sponsored reviews, such as the Cooper Review on superannuation and the Productivity Commission report on executive remuneration may trigger other tax changes in the short-to-medium term.