A Few Interesting Observations From the Budget
Much has been written of the Federal Government’s recent Federal Budget and the changes proposed, and we provide our comments on some of these announcements below:
- The cut in deductible superannuation contributions that can be made from 1 July 2009 (reduced to $50,000 for those 50 and over, and $25,000 for all others).
Will this slow down the number of people setting up their own self managed superannuation funds going forward, given the costs to set up, prepare accounts and have them audited each year?
- The taxing up front of shares and options issued under employee share plans (instead of allowing for the taxation such shares and options when they vest).
Given the number of public companies now suspending their employee share plans, will the Government be forced to back down on these changes?
- The reduction in the private health insurance rebate for those the government considers to be well off (the rebate reduces from 30% of premiums to zero for singles with income over $120,000 and families with combined income of $240,000).
Does this mean those people that have organized with the health fund to apply the 30% reduction direct against premiums should now organize to stop this, as they might not know how much of the rebate that can claim until their tax return is lodged?
- The removal of the ability to apply deductions for losses made from businesses (such as primary production/agricultural businesses) where the taxpayer has other personal taxable income greater than $250,000.
What we now wait to see is what the government defines as non-commercial, and how that is different to the existing rules that define it.
Further changes were announced in the budget but were not as widely reported as the above changes. These included:
- All closely held trusts (eg family trusts) that distribute income will need to report the tax file numbers of all beneficiaries receiving the distribution, otherwise the trustee is required to withhold tax at the rate of 46.5%.
So we are back to having all children that get trust distributions needing to have tax file numbers in order to distribute to them.
- The Tax Office has been given further funding to expand its auditing of wealthy individuals.
Previously, the Tax Office was targeting those considered to have wealth over $30 million. It appears this threshold has been greatly reduced, as now those with wealth over $5 million will potentially receive Tax office attention and audit.
Tags: budget