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50%
Tax Deduction on assets for Small Businesses
Under the proposed
‘tax break’ concession (also referred
to as the investment allowance) the deduction able
to be claimed by business taxpayers in respect of
the GST-exclusive cost of acquiring or constructing
new tangible depreciating assets, or for enhancing
existing assets, required the ‘investment
commitment time’ to be no later than 30 June
2009 for the taxpayer to be in a position to claim
a deduction equal to 30 per cent of that cost. Generally,
the further requirements for this deduction to be
available at the originally proposed 30 per cent
rate were:
1. cost exceeded the minimum expenditure
threshold (generally calculated on an asset by asset
but with a limited aggregation
concession)
2. asset be used by the taxpayer
in the Australian business or installed ready for
use by 30 June 2010.
In the case of ‘small business entities’
the minimum expenditure threshold is $1,000. Otherwise
it is $10,000. Under the original proposal the 30
per cent rate could not be obtained because the
asset was not used or installed ready for use by
30 June 2010, a lower 10 per cent rate was to apply
if the asset was used or installed ready for use
by 31 December 2010.
In order to assist ‘small business’
(which generally is where ‘annual turnover’
is under $2 million), the Treasurer announced as
one of the Budget measures that these taxpayers
will be able to claim the ‘tax break’
deduction (which is in addition to the usual deduction
for depreciation) at the rate of 50 per cent of
the cost of eligible assets acquired between 13
December 2008 and 31 December 2009, and installed
for use by 31 December 2010.
With these proposed changes to the ‘tax break’
concession, the deduction able to be claimed by
reference to the cost of qualifying expenditure
is set out in following table.
Tax Break (Investment Allowance)
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| Business
Entity |
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Investmen
commitment
time(inclusive) |
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Date
of first use or
installed ready(inclusive) |
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Rate |
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| Small
business |
|
13
December 2008 to
31 December 2009 |
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By
31 December 2010 |
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50% |
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| Other
business |
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13
December 2008 to 30 June 2009 |
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By
30 June 2010 |
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30% |
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| Other
business |
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1
July 2009 to 31 December 2009 |
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Between
1 July 2009 &
31 December 2010 |
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10% |
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Medicare
Levy Surcharge Limit increased
The
private health insurance tax rebate is currently available
for a percentage of the premium paid to a registered health
insurer for a complying private health insurance policy.
The percentage available is determined by the age of the
oldest person covered by the policy (30 per cent where
aged less than 65 years). The current rebate is not means
tested. This will change as a result of the Budget with
effect from 1 July 2010.At the same time, the Medicare
levy surcharge (currently 1 per cent of taxable income
and reportable fringe benefits) will increase under a
“carrot and stick” approach. This is designed
to encourage high income earners to keep their private
health insurance cover.
The Medicare Levy Surcharge is levied on Australian taxpayers
who do not have private hospital cover and who earn above
a certain income. The surcharge aims to encourage individuals
to take out private hospital cover, and where possible,
to use the private system to reduce the demand on the
public system.
The surcharge is calculated at the rate of 1% of taxable
income. It is in addition to the Medicare Levy of 1.5%,
which is paid by most Australian taxpayers. The Medicare
Levy Surcharge is imposed on individuals earning over
the threshold who do not have an appropriate level of
hospital insurance. The threshold is $70,000 for individuals
and $140,000 for families.
You do not have to pay the surcharge if your taxable income
is below the income threshold.
50% Education Tax Refund for parents
The Government has introduced the education tax refund
which allows eligible parents to claim a refund
on some education expenses for their children who are
undertaking primary or secondary school studies.
It also allows independent students under 25 years old
who are undertaking primary or secondary school studies
to claim a refund on some of their education expenses.
If you spend up to $750 on eligible education expenses
on a child studying in primary school, you can get back
50% back. The maximum you can get back for each child
is $375 each year.
If you spend up to $1500 on eligible education expenses
on a child studying in secondary school, you can get back
50% back. The maximum you can get back for each child
is $750 each year.
Superannuation Contribution Limit
changes
Less than two years after the introduction of simplified
superannuation reforms with bipartisan support, the Treasurer
has announced changes which will effectively halve the
tax deductible contributions limit relevant to employers
(for salary sacrifice arrangements for employees) and
to the self employed.
The Government will therefore reduce the cap on concessional
superannuation contributions from $50,000 this year to
$25,000 from 1 July 2009. This cap will be indexed.
The other aspect of the policy change is particularly
disappointing for those whose retirement plans relied
on transitional rules, as part of the move in 2007 from
age based contribution limits to fixed dollar contribution
limits.
The change has enabled higher deductible contributions
(up to $100,000) to be made during the financial years
2007-08 to 2011-12 by persons aged 50 and over on the
last day of the relevant financial year. This transitional
unindexed cap for concessional contributions for those
in this age category will now be reduced - from $100,000
to $50,000 - for the 2009-10, 2010-11 and 2011-12 income
years, after which affected persons will revert to the
lower $25,000 cap.
The non-concessional (i.e. ‘after tax’) contributions
cap will remain at $150,000 for the 2009-10 financial
year (or $450,000 over three years). It will only increase
when the new lower $25,000 cap is increased by indexation.
First home owners “boost”
extended
The Government will extend the First Home Owner’s
Boost (FHOB) for an extra six months but will reduced
the benefit by half for the last three months of the extension
period.
For eligible first home buyers entering into contracts
between 1 July 2009 and 30 September 2009 (inclusive),
the FHOB will continue to provide $7,000 for the purchase
of established homes and $14,000 for the purchase of new
homes.
This means that including the $7,000 First Home Owner’s
Grant, until 30 September, purchasers of new homes will
continue to be eligible for $21,000 of assistance. Purchasers
of existing homes will continue to be eligible for $14,000
of assistance.
Between 1 October 2009 and 31 December 2009, the FHOB
grants will be $3,500 for the purchase of established
homes and $7,000 for the purchase of new homes.
This means that including the $7,000 First Home Owner’s
Grant, from 1 October until 31 December, purchasers of
new homes will be eligible for $14,000 of assistance,
and purchasers of existing homes will be eligible for
$10,500 of assistance.
The FHOB grants are in addition to the existing $7,000
grant under the First Home Owners Scheme.
From 1 October 2008, if you are eligible, you can open
a first home saver account. The Australian Government
may make an annual contribution to your account based
on the amount you have contributed to the account. You
do not pay tax on earnings on the account. You do not
need to declare income from this account anywhere on your
tax return. If you are not required to lodge a tax return,
you will need to lodge a first home saver account –
notification of eligibility.
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