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Taggart Federal Budget Overview

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A: SUPERANNAUTION

Reduction of concessional contribution cap [CCC] from 1 July 2009.

  • Concessional contributions cap have been reduced to $25,000 per annum [indexed] with effect from the 2009-2010 financial year.
  • The transitional concessional contributions cap [applicable to individuals aged 50 and over for 2009-10, 2010-11, and 2011-12 FY’s] will be reduced to $50,000 per annum.
  • The annual cap on non-concessional contributions remains at $150,000 per annum for this financial year [2009-10].

These changes will mean:

  • Salary sacrifice arrangements will need to be reviewed to ensure that the arrangements in the 2009-10 financial year do not exceed the new level.
  • Transition to retirement [TTR] strategies will be largely unaffected however they are impacted by the new reduced level of concessional contributions that can be sacrificed.

Temporary reduction of the Government Co-contribution from 1 July 2009 – 30 June 2014

The Government has temporarily reduced the matching rate and maximum co-contribution that are payable on eligible personal non-concessional superannuation contributions, with effect from 1 July 2009. There was no change made to the upper and lower thresholds for co-contribution eligibility for this financial year.

Extension of 50% minimum pension draw down relief from 1 July 2009

The Government has halved the minimum payment amounts for account-based pensions for 2009-10. The limits are based on the pensioner’s age at the commencement of the pension and at the start of each subsequent financial year.

B: TAXATION

Announced tax cuts from 1 July 2009

New personal tax thresholds have been announced for the 2009-2010 financial year. The difference in the rates is mainly for income earners in the income threshold for the 30% tax rate which has been increased from $34,000 to $35,000 and the 40% tax rate which has been reduced to 38%.

Increased Medicare Levy low income threshold

The Government has decreased the Medicare Levy low income threshold from 1 July 2009 for individuals and individuals in families. The Medicare levy for pensions below age pension age will be increased to ensure that pensioners below age pension age do not have a Medicare liability where they don’t a have an income tax liability.

Small business tax changes

  • Expansion of the small business and general business tax break with a bonus deduction of 50% where an eligible asset is acquitted between 13 December 2008 and 31 December 2009, and installed ready for use by 31 December 2010. The previously announced bonuses will continue to apply.
  • Modified PAYG instalments relief for small business from 1 July 2009. This move is designed to ensure that eligible small business, individuals, trusts and small super funds will have additional cash flow through closely aligned PAYG instalments with their likely income tax liability for the year.
  • The Government will make several changes to the small business capital gains tax concession provisions so that they operate flexibly and as intended.

C: SOCIAL SECURITY

  • Age pension age to increase to 67 from 1 July 2017.
  • There will be an increase in government support pension amounts from 20 September 2009.
  • A new pension supplement will be introduced and will be available to all income support payments with the exception of Newstart allowance, Special benefit and Sickness benefit recipients.
  • From 20 September 2009 a new seniors supplement will be established for Commonwealth Seniors Health Card holders and veterans eligible for the Gold Card.
  • From 20 September 2009 the income test taper will increase from 40 to 50 cents in the dollar for a single pensioner, and from 20 to 25 cents in the dollar for each member of a couple above the allowable income free thresholds. Existing part pensions affected by the income test changes will not have their entitlements reduced by this change.
  • The income tested fee for residential aged care will be charged from the date of entry, removing the current 28 day delay.
  • A paid parental leave scheme will be introduced from 1 January 2011. The parental leave will be equal to the federal minimum wage and can be for up to 18 weeks. The Baby Bonus will not be payable if claiming paid parental leave. Neither will other family assistance payments such as Family Tax Benefit Part B, dependent spouse, child housekeeper, and housekeeper tax offsets for the period of payment of the paid parental leave. The payment will form part of the person’s taxable income.
  • The Pension Bonus Scheme will be closed to new entrants from 20 September 2009. An income test concession will be introduced instead. People who have registered prior to the closure will continue accruing entitlements as previously.
  • There will be a reform of family payments from 1 July 2009. This will affect Family Tax Benefit Part A, Baby Bonus and Family Tax Benefit Part B.
  • The private health insurance rebate is proposed to be means tested from 1 July 2010 for middle to high income earners according to age. The definition of income for this purpose will be the same as the definition used for the Medicare Levy Surcharge which includes: taxable income, salary sacrifice, personal deductible super contributions, net investment losses and reportable fringe benefits.
  • The first home owners boost has been extended for another 6 months to 31 December 2009.

If you would like further information or any assistance in relation to your individual needs, please contact our office on (02) 9894 9155 , or by email at taggart@taggartgroup.com.au to speak to one of our advisers.

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