The Budget handed down by the Treasurer Wayne Swan on Tuesday night didn’t really offer much in the way of financial services in either a positive or negative manner.
Having scoured many offerings available outlining the details of this year’s Budget and searching for content that might affect our clients, this SIRA Views will be a brief report and we trust you will find some benefit in the following outline of the key issues relating financial services.
Superannuation Changes
Refund of excess concessional contributions
Date of effect: 1 July 2011
Changes were outlined to reduce the impact of excess contributions tax on people who exceed their concessional cap for the first time.
Those meeting certain conditions can opt to have their excess concessional contributions taken out of their super fund and assessed as income at their marginal tax rate, rather than incurring the 46.5% excess contributions tax. This measure will apply to excess concessional contributions up to $10,000 (unindexed) and only for the first year in which an excess contribution occurs.
The Government has indicated that consultation on the implementation of this measure will occur.
Minimum pension draw down relief phased out
Date of effect: 1 July 2011
The minimum pension withdrawal you are required to make has been halved in recent years as a result of the Global Financial Crisis and its impact on super balances. This draw down relief will be phased out, reducing to 25% (instead of the current 50%) for the 2011/12 financial year and returning to the normal rate from 1 July 2013 as per the following table.
Higher pre-tax contribution caps at age 50
Date of effect: 1 July 2012
People aged 50 and over with less than $500,000 in super will be able to contribute an extra $25,000 in pre-tax (concessional) contributions each year. Eligibility requirements do apply, and the change is scheduled to apply from 1 July 2012. Those over 50 can make pre-tax contributions of up to $50,000 until 1 July 2012 under concessions previously announced, regardless of their super balance.
Extension of co-contribution freeze
Date of effect: 1 July 2011
Changes introduced in the previous Federal Budget to curb eligibility for the Government co-contribution scheme have been extended out by an additional year. This means the current income eligibility levels of $31,929pa for a full contribution and $61,920pa for a partial contribution will remain in place until 2012/13.
Reporting of employer contributions on payslips
Date of effect: 1 July 2012
Employers will be required to include the amount of super contributions actually paid into employees’ super accounts on payslips. Super funds will also be required to notify employees and employers on a quarterly basis if regular payments cease.
Limiting CGT trading stock exemption for super funds
Date of effect: 10 May 2011
The government will remove the trading stock CGT exception for complying superannuation entities for specified assets, with effect from 7.30 pm (AEST) 10 May 2011. This will ensure gains or losses on those assets (primarily shares, units in a trust and land) are subject to CGT, consistent with CGT being the primary code for taxing gains and losses of complying superannuation entities. This will prevent complying superannuation entities treating shares as trading stock, so as to deduct losses on their shares against income other than capital gains.
Taxation Changes
Increase Trust Taxation
Date of effect: 1 July 2010
The Government will enable the streaming of capital gains and franked distributions and target the use of low tax entities, especially exempt entities, to reduce the tax payable on the taxable income of a trust. The measure will reduce opportunities for taxpayers to reduce their tax liabilities and implements the recommendations of the Board of Taxation to take interim steps to improve the trust income tax provisions.
Single rate for car fringe benefits
Date of effect: 10 May 2011
Changes were made to the way cars are treated under the fringe benefits tax; which will reduce the motivation to drive unnecessarily to receive more attractive tax treatment.
Currently, multiple statutory rates are used to determine the taxable value of car fringe benefits, which depend on distance travelled. These will be replaced with a single rate of 20%. This measure will apply to new contracts entered into after 7:30pm (AEST) on 10 May 2011 and will be phased in over four years, as follows:
We do not see much in this Budget that will affect our clients other than the minimum pension draw downs and higher contributions caps.
As always, we will be reviewing your situation and will discuss the relevant issues with you. If you wish to discuss any of this or other information with us, please call.
