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News Bulletin : ADA News Bulletin June 2011
46 JUNE 20 11 Compiled by Michael Lannon investment insight Smart year-end strategies and 2011 Federal BUDGET HIGHLIGHTS www.2020directinvest.com.au/ada | 1800 352 021 100% entry fee rebate on managed funds Treasurer, Wayne Swan's fourth Labor budget handed down on 10 May 2011 was relatively mild with few surprises or major changes. However, some new measures were outlined which may impact how you manage your finances today as well as plan for your retirement. It is important to note that unlike previous years, this budget was delivered by a minority government that may find it more difficult than usual to get some of these measures through both Houses of Parliament. The key proposals announced in the budget were as follows: • Unlike previous years no changes were made to the personal tax thresholds or rates. • From 1 July 2011 those who exceed their superannuation concessional contribution cap (tax deductible contributions) for the first time by less than $10,000 may be able to avoid paying excess contributions tax. This is a welcome measure because the penalties for accidentally over contributing were excessive. • From 1 July 2012 people aged 50 and over with less than $500,000 in super will be able to contribute an extra $25,000 in pre-tax dollars (concessional contributions) each year. • The 50% pension minimum draw down relief will be reduced to 25% in 2011/12. The minimum pension withdrawal a person was required to make had been halved in recent years as a result of the Global Financial Crisis and its impact on super balances. This draw down relief will be phased out, reducing to 25% for the 2011/12 financial year and returning to the normal rate from 1 July 2013. • People under 18 will no longer be able to access the low income tax offset to reduce tax payable on unearned income such as dividends, interest and rent. This measure will reduce the attractiveness of investing on behalf of minors or making trust distributions to minors. This is because currently it's possible for a minor to receive a maximum tax-free income of $3,333 pa when the low income tax offset is taken into account. However, from 1 July 2011, unearned income will be taxed as follows: Unearned income Tax payable $0--$416 Nil $417--$1,307 66% of excess over $416 $1,308 + 45% of entire unearned income • Fringe benefits tax on salary packaged cars will be simplified to a single rate of 20%. The net effect is that those who drive their cars less than 15,000 kms per year will immediately benefit and those driving more than 25,000 kms per year will be worse off over the next few years. • Lower income earners will receive a greater proportion of the low income tax offset through their pay packets. • Extension of co-contribution freeze -- from 1 July 2011 changes introduced in the previous 2010 Federal Budget to curb eligibility for the government co-contribution scheme have been extended out by an additional year. This means the current income eligibility levels of $31,929 pa for a full contribution and $61,920 pa for a partial contribution will remain in place until 2012/13. • Reduced HECS discounts -- from 1 January 2012 for payments made under the Higher Education Contribution Scheme (HECS): the discount available to students electing to pay their student contribution upfront will be reduced from 20% to 10%, and the bonus on voluntary payments of $500 or more will be reduced from 10% to 5%. Most of these measures were leaked prior to the budget so there were no real surprises. So called middle class welfare was targeted with the family payment income test remaining at $150,000 without indexation until 2014. This sparked a debate about whether or not a family with an income of $150,000 was 'rich'. One thing remains clear "If you plan to live reasonably comfortably in retirement the onus is on you to be adequately prepared as the government will be unable to support Australia's ageing population in the future."
ADA News Bulletin May 2011
ADA News Bulletin July 2011