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The government has framed an “election” budget which is not surprising. The imposition of additional taxes and restrictions on superannuation contributions is disappointing. For most people, raising children and paying off mortgages are the priorities in their 30s and 40s. Often it is not until one reaches their 50s that they have the capacity to make substantial contributions toward retirement savings.
Whilst we agree with the need to assist lower income families, companies have borne the cost which is an unfortunate outcome given they are the drivers of the economy and superannuation savings – an essential ingredient in a rapidly aging population.
The following is a brief snap-shot summary of measures announced in last night’s federal budget that will directly impact client financial planning issues:
Deferral of higher concessional contributions cap
The start date of the higher concessional contributions cap will be deferred for two years from July 2012 to July 2014. This means that concessional superannuation contributions will be capped at $25,000 for everyone until at least 2014.
Higher Contributions tax for high income earners
For those with incomes in excess of $300,000 per annum, a higher 30% contributions tax will apply to contributions that are in excess of the threshold. Assessable “income” will include salary, adjusted fringe benefits, total net investment loss, target foreign income and tax-free Government pension and benefits.
Employment termination payment (ETP) tax offset
From 1 July 2012, only that part of an affected ETP, such as a golden handshake, that takes a person’s total taxable income (including the ETP) to no more than $180,000 will receive the ETP tax offset. Amounts above this will be taxed at normal marginal tax rates.
The ETP tax offset ensures that amounts up to the ETP cap are taxed at no more than 15% for those over preservation age and 30% for those under preservation age.
The promised reduction in company tax will not proceed.
This means that companies will continue to pay 30% tax plus having to carry the extra SGC burden of 0.25% of payroll from 2012-13 to 2014-15 then 0.5% per annum to 2019-20 until the SGC rate reaches 12% per annum.
Company loss carry-back
Companies will be able to offset current losses against the prior year’s taxation paid. In 2013-14, companies will be able to offset against the prior two year’s company tax paid.
Medicare low income thresholds
The Medicare low income thresholds will increase to $19,404 for individuals and $32,743 for families for 2011-12. For dependent children and students the threshold increases as an additional amount of $3,007.
From January 2013 families will receive a Schoolkids bonus worth $410 for each primary school student and $820 for each child in high school. The payments will be automatic and paid twice a year in January and July each year.
Whilst there were a number of other issues contained in the budget, we have simply addressed those matters that represent significant changes and/or are specific to financial planning issues.
Please do not hesitate to contact a Hewison Private Wealth adviser for any further clarity around either of the changes announced in last night’s Budget, and how this may impact your financial situation.
Hewison Private Wealth is a Melbourne based independent financial planning firm. Our financial advisers are highly qualified wealth managers and specialise in self managed super funds (SMSF), financial planning, retirement planning advice and investment portfolio management. If you would like to speak to a financial adviser on how you can secure your financial future please contact us 03 8548 4800, email email@example.com or visit www.hewison.com.auPlease note: The advice provided above is general information only and individuals should seek specialised advice from a qualified financial advisor. The views in this blog are those of the individual and may not represent the general opinion of the firm. Please contact Hewison Private Wealth for more information.