The federal budget has been handed down and the promise of a return to surplus delivered. Here in this issue of On Balance, we highlight some budget changes that are likely to be of particular interest to many of our clients.

Spending Cuts
Significantly major cuts have been made to defence spending, overseas aid and the 1% reduction of the company tax rate to 29% shelved. The previous commitment to new personal income tax scales from 1 July 2012 with a tax-free threshold of $18,201 has been honoured. However non-residents’ tax increases with a minimum rate of 32.5% and the 50% discount on Capital Gains Tax removed for gains accruing after 8 May 2012.

The tax effectiveness of superannuation and pension funds remains unchanged with superfunds taxed a maximum of 15% and pension funds tax-free. Contributions to superannuation funds by those with incomes greater than $300,000 p.a. will however be subject to an additional 15% surcharge from 1 July 2012. All contributions to superannuation made after 30th June 2012 are now capped at $25,000, however the proposed incentives for those with balances less than $500,000 have been deferred to July 2014.

Company Tax
Whilst much has been made of shelving the 1% company tax cut I think an important and positive initiative was the introduction of the company carry back loss provisions. From 1 July 2013, companies will be able to carry back up to $1.0m of losses against tax paid up to 2 years earlier and get a refund of previous tax payments. This is significant for businesses who have had abnormal trading results or suffered a downturn following a number of good trading years where large tax liabilities where paid.

Personal Tax-Related
There are a wide range of personal tax-related changes including Medicare levy threshold increases, means testing of the medical expense offset, changes to golden handshakes, changes to living away from home allowances etc. The list of budget measures is extensive and the specific detail of each is more fully explained in this link to the Institute of Chartered Accountants budget commentary.

If you would like to discuss issues in the budget which are specific to your affairs please give any of us a call at Edney Ryan Chartered Accountants.