Legislation Updates & Changes
Budget 2008 major changes
Gifting
If you are contemplating assisting family members, Centrelink allows up to $10,000 per financial year as a gift, provided that you don’t then exceed $30,000 in a five-year period.
This means that gifting before June 30th and then on or after July 1st will allow $20,000 to be transferred without Centrelink issues.
If you have lent money to a family member and repayment is either not happening or unlikely to happen, then informing Centrelink that you have forgiven $10,000 now and then $10,000 1st July, also has the same effect of gifting and therefore reducing assessed assets.
Budget Update
On 13 May 2008, the federal government delivered its budget for 2008-09. This is a snapshot of the issues we believe will have some impact on investors, bearing in mind that it’s only general information and doesn’t consider your personal circumstances. Many of the measures are also subject to the passing of legislation by the Government.
Tax savings for most
The government has stuck to its pre-election plan to reduce personal taxes progressively over the next three
years. By 2013-14, the government’s goal is to have only three rates of personal tax – 15%, 30% and 40%.
The low income tax offset has been extended and the proposed changes are:
Shifting the surcharge
From 1 July 2008, the existing annual Medicare Levy Surcharge thresholds of $50,000 for a single person and
$100,000 for a couple or family will be increased to $100,000 and $150,000 respectively.
These thresholds determine the income level at which the Medicare Levy Surcharge of 1% will apply to you if you don’t hold private hospital insurance.
Concessional FBT treatment amended
The previous Fringe Benefits Tax exemption for eligible work-related items, such as laptop computers, personal digital assistants, briefcases and tools of trade, will be amended to limit the exemption to items used primarily for work-related purposes and provided directly to you as an employee by your employer.
Family matters
The hourly rate of child care benefit is currently reduced over certain income ranges to a minimum rate (currently up to $28.20 per week for 50 hours of approved care). The abolition of this minimum rate from 7 July 2008 will mean that families with incomes over $110,000 per annum will no longer be eligible to receive any child care benefit. The child care rebate is a tax rebate claimable on out-of-pocket expenses for approved child care. To encourage parents to return to the workforce, from 1 July 2008 the rebate will be increased from 30% to 50% of expenses. The maximum level of expenses claimable will also increase from $4,354 to $7,500
(indexed) per child per year. Payments will be made quarterly instead of annually, commencing from October 2008.
From 1 January 2009, the baby bonus will only be available to families with an adjusted taxable income of $75,000 or less in the six months after the birth of a baby (equivalent to $150,000pa). Parents with babies born before 1 January 2009 will not be affected. For the first time, the bonus will also be paid to parents for newly adopted children between 2 and 16 years of age. The bonus will now be paid in 13 fortnightly instalments from the date of claim, not as a lump sum. The government will introduce an education tax refund of 50% on eligible education expenses from 1 July 2008. Under this proposal, families in receipt of Family Tax Benefit Part A will be eligible to claim refunds in their annual tax return of:
• 50% per year for up to $750 of eligible education expenses for primary school children (a maximum benefit of $375pa per child)
• 50% per year for up to $1,500 of eligible education expenses for secondary school children (a maximum benefit of $750pa per child).
Redefining ‘income’ for entitlements
From 1 July 2009 the government will amend what is defined as ‘income’ for determining your level of entitlement to claim a range of benefits, including:
• income support payments for people below Age Pension age
• family assistance
• child support
• superannuation co-contribution payments
• Commonwealth Seniors Health Card.
The new definition of income will include amounts that are salary sacrificed to your super, reportable fringe benefits and net financial investment and rental property losses. Importantly, it’s only a change in definition for qualification purposes. It doesn’t make these amounts subject to personal taxation.
What does it all mean?
The reforms to Australia’s personal marginal tax rate system, tax offset eligibility and Medicare levy surcharge arrangements will have the result of increasing the level of disposable (after-tax) income that most people will have. The question is, what will you do with this extra money?