Federal Budget 2011
The Federal Budget contained a number of relatively minor amendments, with the main focus on restricting spending to bring the Budget back into surplus by 2012/13.
There were several announcements relating to superannuation, tax and pensions that could have an effect on your financial situation:
If you think you may be affected and have questions, your Count Adviser can provide more information about what action you need to take.
Changes to minimum payment amounts for account based pensions
Due to the GFC, the Government halved the minimum annual pension that must be received from account based pensions. The reasoning was that they did not want to force retirees to sell investments when account balances were down to fund minimum pension payments.
For 2011-12, the Government has decided to reduce minimum annual pensions by 25% and then return to normal levels in 2012‑13.
The table below illustrates the minimum pension percentage income factors for 2010-11, 2011-12 and 2012/13:
| Age | Minimum payment 2010-11 |
Minimum payment 2011-12 |
Minimum payment 2012-13 |
Under age 65 |
2% |
3% |
4% |
65-74 |
2.5% |
3.75% |
5% |
75-79 |
3% |
4.5% |
6% |
80-84 |
3.5% |
5.25% |
7% |
85-89 |
4.5% |
6.75% |
9% |
90-94 |
5.5% |
8.25% |
11% |
95 and older |
7% |
10.5% |
14% |
Limited relief for excess concessional contributions
The introduction of caps on superannuation contributions since 1 July 2007 has seen a large number of people inadvertently breach the caps and incur excess contributions tax of up to 93%.
The Government announced limited relief from 1 July 2011 where individuals exceed the concessional contributions cap.
Individuals will have the option of taking excess concessional contributions out of their superannuation fund and including them in assessable income taxed at their marginal tax rate, rather than incurring excess contributions tax.
This measure will only apply where an individual has made excess concessional contributions up to $10,000 in a particular year and does not apply to non-concessional contributions.
Super contribution disclosure on employee payslips from 1 July 2012
From 1 July 2012, the Government will ensure that employees receive information on their payslips about the amount of superannuation actually paid into their account; and employees and employers will receive quarterly notification from their superannuation fund if regular payments cease.
Changes to the Low Income Tax Offset
The good news is that the amount of tax withheld from your salary may be reduced as the Government increases the amount of Low Income Tax Offset included in the calculation.
The Government will increase the amount of LITO from 50% to 70% of your total entitlement. This measure aims to provide some additional relief to low and middle income earners throughout the year. The remainder will be paid as a lump sum on assessment of income tax returns.
The bad news is that minors (under 18 years of age) will not be able to access the LITO to reduce tax payable on unearned income, that is, dividends, rent, royalties and other income from property from 1 July 2011. The aim of the measure is to discourage income splitting between adults and children. This will necessitate a review of family trust distributions to minors going forward, as the effective tax free rate for minors would reduce to $416 (In 2010-11 the tax free threshold for minors was effectively $3,333 due to the application of the LITO).
Fringe benefits tax reform – car fringe benefits
If you salary package your car, you may have driven a bit further than usual near the end of the financial year to improve the tax benefits.
The incentive to make long drives is being removed by the Government changing the‘statutory formula’ method for determining the taxable value of car fringe benefits. The Government is replacing the current statutory rates with a single rate of 20% applying regardless of the distance travelled. This measure applies to new contracts entered into after 7:30 (AEST) on 10 May 2011 and will be phased in over four years.
Introduction of a new Flood Levy
The Government has introduced a Flood Levy applicable only for the 2011-12 income year.
If you have taxable income in 2011‑12 of $50,000 or less you will not pay the levy. If you have taxable income between $50,001 and $100,000 you will pay 0.5 per cent of taxable income above $50,000. If you have taxable income over $100,000 you will pay 0.5 per cent of their taxable income between $50,001 and $100,000 and 1.0 per cent of their taxable income over $100,000.
As the levy is based on taxable income, strategies such as salary sacrificing can potentially reduce your flood levy liability.
Improvements in Family Tax Benefit
The Government will increase the maximum rate of Family Tax Benefit (FTB) Part A for children aged 16 to 19 who are full-time students to the same rate paid for 13 to 15 year olds. This will increase FTB Part A by up to $4,208 a year for 16 and 17 year olds, and up to $3,741 a year for 18 and 19 year olds.
In addition, the Government will allow families to take an advance payment of FTB Part A. Families will be eligible to take a one-off advance payment of up to 7.5% subject to a maximum of $1,000, and/or a continuous advance payment of the minimum amount of around $160 every six months.
The advances will be repaid over six months by reducing future fortnightly FTB payments. Advances will be subject to an assessment of a family’s ability to repay the advance without falling into financial hardship.