This week the Federal Government released their response to the Henry Tax Review which was looking at the areas of Retirement Savings, Personal Taxation and Social Security. With an election looming there were not any major changes to the system at this stage but watch this space as the Federal Budget is released next week.
The Henry Tax Review was over 1000 pages long with 138 key recommendations the changes which the government has released are summarised as below:
- the superannuation guarantee (SG) rate will increase gradually from 9% to 12% from 1 July 2013
- the SG contribution age limit will increase from 70 to 75 from 1 July 2013
- a Government super contribution of up to $500 p.a. will be made for people earning up to $37,000 p.a. from 1 July 2012 to effectively refund contributions tax
- the Concessional Contribution cap will be reinstated to $50,000 p.a. from 1 July 2012 for people aged 50 or over with super balances below $500,000
- the company tax rate will gradually reduce to 28% by 1 July 2014 (and two years earlier for eligible small businesses)
- very generous depreciation rules will apply to small businesses from 1 July 2012
- a 40% Resource Super Profit Tax will be introduced from 1 July 2012
The Government has publicly rejected some recommendations which have some good implications while this government remains in term atleast:
- The family home will NOT be included in the means testing;
- Parents will NOT be required to work when youngest child turns 4 to access benefits;
- Rent assistance eligibility will NOT be restricted;
- Age Pension indexation will NOT be reduced;
- Pensioner and low income concessions for utilities, transport and other essential services will NOT be reduced;
- State Governments will NOT be asked to change the market rent for public housing recipients.
- Preservation age and pension age will NOT be aligned;
- The Government will NOT offer an annuity income stream product.
- Land Tax will NOT be introduced on the family home;
- No changes will be made to the taxation system to harm not-for-profit sector including removal of tax concessions;
- Capital Gains Tax discount will NOT be reduced;
- Medicare Levy will NOT be removed;
- Dividend imputation will NOT be removed;
- Bequests tax will NOT be introduced;
- Luxury car tax will NOT be abolished; and
- Fuel tax will NOT be indexed to CPI.
- Defence force personal will NOT have remuneration reduced;
- The Government also re-affirmed that it will never increase the rate or broaden the base of GST; and
- The Government also stated it would not remove tax free superannuation payments for individuals who are 60 or over.
My view it that we may see some other changes come through with the Governments final budget before the election campaign begins but being mindful of the election cycle I wouldn’t image any major changes to the taxation system would come into the picture.
Watch this space as I will be keeping an eye out on the upcoming Budget and will provide a summary of any changes as they come to hand.
Scott Malcolm (firstname.lastname@example.org) is Director of Money Mechanics (ph: 6257 5557) a fee for service advice firm who are authorised to provide financial advice through PATRON Financial Advice AFSL 307379.
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