The changes are:
Companies
- The company tax rate to be cut from 30% to 29% in 2013/14, then to 28% from 2014/15
Small business
- The tax rate to be cut to 28% from 2012-13. It is expected to affect 720,000 businesses.
- The immediate write-off of assets valued at less than $5000 (from July 1, 2012)
- Small businesses will be able to write-off all other assets (except buildings) in a single depreciation pool at a rate of 30 per cent. (from July 1, 2012)
Small Miners
- To receive Resource Exploration rebate of 30% without having to offset against profit.
- Definition of exploration to include geothermal energy.
Both measures will boost the small exploration sector.
Superannuation
- 12% superannuation guarantee, increased incrementally, in 2019-20.
- Super guarantee extended to workers aged between 70 and 75.
- Government contribution of $500 for workers earning up to $37,000 from July 1, 2012. The current co-contribution stays
- Workers aged 50 and over with balances below $500,000 will be able to double concessional superannuation contributions to $50,000 from July 1, 2012.
Not for profit sector
- No changes, which is a good thing given the valuable work the sector performs.
LOSERS
Mining industry
- The big hurt with introduction of the Resource Super Profits Tax from July 1, 2012 on 40% of profits on very profitable projects would pay more resource charges under the RSPT.
- A lot of moans already.
But smaller explorers will get benefits from an exploration rebate.
Luxury cars dealers
- No joy, it remains in place and will not be abolished.Under the changes for small businesses, they will be able to immediately write-off assets valued at under $5,000, up from $1,000 under the present law.
All other assets, except buildings, will be able to grouped in a single depreciation pool at a rate of 30%, rather than the current need to allocate assets into two different depreciation rules.
The measure will increase cash-flow by deferring tax liabilities and reduce compliance costs by removing the requirement to calculate depreciation on lower value assets.
It will also make asset ownership more attractive than leasing or debt financing, which could be bad news for banks and finance providers, although most will structure packages to benefit themselves and their clients.
The policy is expected to lower government income by $1 billion in 2013-14.
And after this, taxes on interest savings and reforming tax returns to lower costs and make life easier for everyone.
Widely forecast before its release, the review looks at Australia’s reliance on tax agents to complete workers’ tax returns every year.
This change could be bad news for tax agents of all kinds, especially accountants.
The review recommends workers instead receive a "default return" from the ATO, which would only need the taxpayer’s tick of approval. In order for this to come into effect, the review recommends the scrapping of work deductions.
The Henry review suggests that most work-related deductions be scrapped, to be replaced by a standard rate "linked to the level of income from work".
"An automatic standard deduction should be introduced to simplify people’s interactions with the tax system and facilitate much greater levels of pre-filling of tax returns," the review says.
A standard deduction would cut the need to keep receipts. However to ensure workers with a high amount of deductions are protected, taxpayers would still be able to claim "substantiated expenses".
The review also suggests a much-higher personal tax-free threshold of $25,000 before you start paying tax.
Taxing income from savings
The review proposes a 40% discount on all income from savings, as well as on all residential rental income and losses, and capital gains.
The capital gains might be hard to push through, unless its linked to other tax changes (i.e. higher taxes)
These recommendations were widely talked about before yesterday’s announcement, with the banks in particular saying the current system doesn’t give enough incentives for workers to put money in savings accounts.
Currently, interest earned on all savings accounts and term deposits is taxed at a worker’s top marginal rate.
The review says the current system is far less generous than the tax treatment of other investments such as shares and property, which the review says encourages investors to take on too much debt.
Negative gearing in particular contains problems for the future if the current housing boom goes sour, just as it did in the early years of last decade.
