2009 FEDERAL BUDGET SUMMARY

The following is a brief summary of the major budget announcements from a taxation or superannuation perspective that will have the greatest impact in the next 12 months.  Please note that some of these announcements are yet to become Legislation.

Major Superannuation Concessions

The Concessional (tax deductible) Cap for superannuation contributions introduced under the "Better Super" regime has been halved from $50,000 to $25,000, and the Transitional Concessional Cap (for employees aged 55+) has been reduced to $50,000 per year from its former non-indexed limit of $100,000, effective from 1 July 2009. This includes Superannuation Guarantee, salary sacrifice and personal contributions that attract a tax deduction. Therefore, eligible taxpayers have until 30 June 2009 to access the original contribution amounts;

The Non-Concessional (non-deductible) Contributions Cap will remain at $150,000 for 2009-10 (or $450,000 under the 'Bring forward option' over 3 years). It was previously announced that this would be indexed; and

The Government Co-contribution Scheme will be temporarily reduced from $1.50 for every dollar contributed up to a maximum of $1,000, to a rate of $1 per $1 contributed for the 2009-10, 2010-11 and 2011-12 years, increasing back up to $1.25 for the 2012-13 and 2013-14 years and returning to $1.50 for the 2014-2015 year. For the 2008-09 year, the full co-contribution of $1.50 is allowable for taxpayers earning $30,342 or less and gradually phases out when income reaches $60,342.

Individuals

Tax Rate Changes Remain

The Government has left the tax rate cuts announced in the previous Budget unchanged.

For the 2008-2009 income year, the tax rates for resident individuals are:

For the 2009-2010 income year, the tax rates for resident individuals are:

Private Health Rebates & Medicare Levy Surcharge

The Government has announced that the 30% Private Health Insurance Rebate will be reduced for single taxpayers earning more than $75,000, and families earning more than $150,000 per year from 1 July 2010.

According to the budget announcement, the Medicare levy surcharge rate will also be increased for singles earning above $90,000 and families above $180,000 to continue to provide higher income Australians with incentives to take out private health insurance.

Business Taxation

Small Business and General Business Tax Break

The budget announcement increases the rate of deduction to 50% for "small businesses" acquiring an eligible asset between 13 December 2008 and 31 December 2009 provided the asset is installed ready for use by 31 December 2010.

It is assumed that the term "small businesses" will refer to a small entity as presently defined in the tax law; ie. carrying on business with an "aggregated annual turnover" of less than $2 million.

Example: A small business entity expending $30,000 on 12 May 2009 to acquire an eligible asset which is installed ready for use on 1 July 2009 would obtain an additional deduction of $15,000 in the 2009-2010 year. This presumes the legislation is ultimately enacted in accordance with the terms of the budget announcement.

The previously announced provisions contained in the Bill that apply to businesses which are not "small businesses" have been passed by Parliament along with the above changes. The Bill received Royal Assent on 22 May.  

For more information, refer to the ATO website at Investment Allowance.  Apart from changes to the tax deduction percentage and dates being extended, the main features of the Allowance remain as summarised in our April newsletter.

Please contact our office should you require clarification on any of the above areas or if you want to discuss how you can get the most out of your business or pay packet.

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