Government confirms previously announced tax changes will go ahead

Tax

Kade Anthony 12-May-2010

The Government confirmed their commitment to some previously announced tax measures:

• 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.

50% savings discount for interest income from 1 July 2011

The Government plans to provide a 50% tax discount on up to $1,000 of interest earned by individuals, including interest earned on deposits held in authorised deposit taking institutions, bonds, debentures and annuities.

Currently there are higher levels of tax applying to interest income, compared to other forms of investment income. The discount will be available for interest income earned directly as well as indirectly, such as via a trust or managed investment scheme, and is expected to benefit around 5.7 million taxpayers in 2011-12.

Example

To generate $1,000 of interest a taxpayer would need savings of $16,667 assuming a 6% interest rate. As there is no preservation or holding period requirement included in this measure, the 50% savings discount provides an alternative shorter-term savings mechanism, particularly for those affected by super contributions caps.

Simplifying your tax return - standard tax deduction from 1 July 2012

The Government plans to introduce a standard deduction for work-related expenses and the cost of managing tax affairs. The standard deduction will be $500 for the 2012/13 financial year, and then $1,000 for the 2013/14 and subsequent financial years.

This standard deduction would be available regardless of whether relevant expenditure was actually incurred. For example, a person who completes their own tax return would be able to claim a deduction for their own efforts. The standard deduction will translate into a $157.50 saving for a person on a 30% marginal tax rate in the first year of the measure and a $315 saving in subsequent years.

Where a person’s deductible expenses exceed the standard deduction amount, they will be able to claim the higher expenses instead of the standard deduction.

Personal tax rate reductions legislated from 1 July 2010

As announced in the 2008 budget, the personal income tax thresholds for the 2010- 2011 year will be as follows:

Income threshold Tax rate

$0 - $6,000 0%

$6,001 - $37,000 15%

$37,001 - $80,000 30%

$80,001 - $180,000 37%

$180,000+ 45%

These personal tax rates differ from the tax rates for 2009-2010 in that the income threshold for the 30% tax rate has been increased from $35,000 to $37,000 and the 38% tax rate has been reduced to 37%