The major Budget announcements were:

Individuals

Dependent spouse rebate

Will be phased out for dependent spouses aged less than 40 to encourage them to go back to work. The exception is for taxpayers with an invalid or permanently disabled spouse, supporting a carer, or people who are eligible for the zone, overseas forces and overseas civilian tax offsets.

Low income tax offset for low to middle income earners

The low income tax offset that is delivered to low and middle income earners through their regular pay during the year will be increased from 50% to 70% of their total entitlements from 1 July 2011. The remaining 30% will be paid on assessment of the income tax return for the relevant year.

Low income tax offset for minors

The ability for children under 18 years of age to use the low income tax offset for certain income (namely passive income such as interest and dividends) will be limited from 1 July 2011. This would discourage distributions the minor may ordinarily receive from a family trust. Income earned by minors from paid work will continue to be eligible for the low income tax offset.

Self-education expenses

These will no longer be deductible against all government assistance payments from 1 July 2011. This change follows the recent High Court Decision in FC of T v Anstis.

HECS discount

The discount on up-front payments will be reduced from 20% to 10%, and the bonus on voluntary payments to the Tax Office of $500 or more will be reduced from 10% to 5% from 1 January 2012.

Family Tax Benefit and family payments adjustments

Family Tax Benefit Part A

• families will be eligible for an advance of up to 7.5%, up to a maximum of $1,000 of their annual entitlement from 1 July 2011. This will be repaid over 6 months by reducing future fortnightly Family Tax Benefit payment.
• will be limited to children up to 21 years of age from 1 January 2012. The child should consider alternative benefits such as Youth Allowance.

Indexation of Family Tax Benefit Part A and B supplements will be suspended for 3 years and indexation of family payment higher income thresholds and limits will also be paused at their current level until 1 July 2014 (rather than being CPI-indexed). This means that income thresholds for Family Tax Benefit Part A and B, dependency tax offsets, the Baby Bonus, Paid Parental Leave should remain largely unchanged.


Contact

Syd Jenkins
T +61 8 9225 5355
sjenkins@moorestephens.com.au

www.moorestephens.com.au