2009 Federal Budget
Budget Overview
A “temporary collapse in revenue” has prompted a “program of responsible borrowing” and “longer term nation building projects” by the Rudd Labor Government, as announced in the Federal Budget. The government hopes that this will provide the stimulus needed for the economy, with the aim of bringing the budget back to surplus in the medium term.
As a result, no significant tax changes were announced, although measures have been proposed to reduce tax concessions for high income earners in the form of superannuation reform and changes to the private health insurance offset. Contrary to speculation, the incentive for first home owners has been extended and so has the small business tax break. Reform of the tax system is high on the agenda but tax cuts announced in last year's Budget will be honoured.
Here are the highlights of the tax and superannuation changes announced in the Budget.
Highlights
This special CCH Budget Night Report outlines the tax and superannuation changes announced in the Budget. Here are the highlights.
Superannuation concessions
* The annual cap for concessional superannuation contributions has
been halved from $50,000 to $25,000, and the transitional concessional contributions cap has been reduced to $50,000 per year from its former annual limit of $100,000.
* The superannuation co-contribution scheme will be reduced to a
rate of 100% for contributed amounts for the 2009/10, 2010/11 and
2011/12 years, increasing to 125% for the 2012/13 and 2013/14 years and returning to 150% for the 2014/15 year.
Individuals and families
* From 1 July 2010, the government will introduce three new
“Private Health Insurance Tiers” in respect of the Private Health Insurance Rebate.
* From the 2008/09 year, the Medicare levy low-income thresholds
will be increased to $17,794 for individuals and $30,025 for individuals in families.
* The First Home Owner’s Boost will be extended for an extra six
months.
* The employee share scheme deferral election will not apply to
shares and options acquired after 7.30pm on 12 May 2009.
* From the 2009/10 income year, taxpayers with an adjusted taxable
income of over $250,000 will have excess deductions quarantined to the business activity under the non-commercial losses rules.
* From 1 July 2009, the foreign employment income exemption will
only be available for income earned by aid or charitable workers, government aid workers, and specified government employees.
* From 1 July 2009, Family Tax Benefit Part A (FTB-A) payment
rates will be indexed by the Consumer Price Index. The higher income thresholds for family payments (FTB-A, FTB-B and Baby Bonus) will be maintained at their current level until July 2012.
* A Paid Parental Leave scheme will be available to parents for
births and adoptions that occur on or after 1 January 2011.
Small Business
* A bonus deduction of 50 per cent will be available to small
businesses that acquire an eligible asset between 13 December 2008 and
31 December 2009 and install it ready for use by 31 December 2010
* The application of the income test for the entrepreneurs’ tax
offset will be deferred for 12 months and commence on 1 July 2009.
* The government has made the income recovery subsidy payments for
the Victorian bushfires and for the North Queensland floods exempt from income tax.
* Certain grants to small businesses and primary producers
affected by the Victorian bushfire will be income tax exempt.
Companies and trusts
* From 2010/11, the current R&D concession will be replaced by the
new R&D tax credit.
* From 1 July 2009, the non-commercial loan rules will be extended
to payments by way of a licence or right to use real property and chattels .
* The government will convert Medibank Private to a “for profit”
government-owned business enterprise in early 2009/10.
* There has been confirmation that the immediate annuity
conditions for life insurance companies did not change when they were transferred to ITAA 1997.
* Australia’s foreign source income attribution regimes will be
reformed.
* A number of technical amendments will be made to the Uniform
Capital Allowance rules.
* The government will implement the recommendations of the Board
of Taxation to improve the taxation treatment of off-market share buy-backs.
* The government will change the thin capitalisation regime for
approved authorised deposit taking institutions.
* Australian managed investment trusts will be able to make an
irrevocable election to apply the capital gains tax regime as the primary code for taxing certain disposals of assets, with effect from the 2008/09 income year.
* A limited CGT roll-over will be provided for assets transferred
between trusts that have the same beneficiaries with the same entitlements and no material discretionary elements (ie fixed trusts).
* From 1 July 2010, TFN withholding arrangements will apply to
closely held trusts.
Philanthropy
* The government has released its interim response to the High
Court decision in FC of T v Word Investments Ltd 2008 ATC 20-072.
* The government will provide a mechanism to conduct a triennial
review of the guidelines for, and organisations on, the four deductible gift recipient registers, with effect from the 2009/10 income year.
Tax administration
* The government will provide $595.2m over four years to help
businesses remain viable in the face of the global recession, to tackle emerging revenue risks and promote community confidence in the tax system.
* Treasury will be provided with additional funding to fund
private sector expert input on the practical and commercial issues arising from proposed tax changes.
* A discussion paper has been released to progress the Tax Design
Review Panel’s recommendation that consideration be given to whether or not the Commissioner should be given further power to modify the tax law to give relief to taxpayers.
* Over 100 provisions in the tax laws that provide unlimited
amendment periods will be repealed.
Other superannuation and retirement measures
* The age pension age will be gradually increased to 67 years of
age.
* Superannuation funds will be required to align their lost
superannuation reporting with unclaimed money regulations and to transfer lost superannuation accounts with balances less than $200 to unclaimed monies.
* The minimum drawdown amount for account-based pensions will be
halved for the 2009/10 income year.
* The future tax panel's review into retirement incomes has
released its report, recommending keeping the superannuation guarantee charge at 9%, increasing the age pension age to 67 years and aligning the age pension with the preservation age.
* Australia and New Zealand have agreed in principle to allow
movement of superannuation benefits between Australian and New Zealand superannuation funds.
Indirect and other taxes
* The administration of GST is to be streamlined, and compliance
costs reduced, from 1 July 2010.
* The GST law will be amended to clarify the GST treatment of the
Carbon Pollution Reduction Scheme.
* Countries eligible for the Indirect Tax Concession Scheme have
been expanded.
* The offshore exploration incentive in the petroleum resource
rent tax will be extended by one year.
Carbon Pollution Reduction Scheme
* With effect from the introduction of the Carbon Pollution
Reduction Scheme all Kyoto units registered in Australia will be subject to the scheme’s proposed tax treatment.
* The government will delay the start date of the Carbon Pollution
Reduction Scheme by one year to 1 July 2011.