ACK Bookkeeping Services

FEDERAL BUDGET TAX CHANGES 2012/13

The following is a summary of the major tax changes announced in the 2012 budget that has an impact on individuals and businesses starting 1 July 2012.

Tax Changes for individuals:

The Flood Levy that was applied to payments made from 1st July 2011 to 30 June 2012 will be abolished from the 1st of July 2012. The flood levy was designed to assist affected communities recover from the recent floods by providing additional funding to rebuild essential infrastructure.
The tax-free threshold of $6000 will increase to $18,200. The maximum value of the low-income tax offset (LITO) reduces from $1,500 to $445.
The first marginal tax rate of 15% increases to 19% on taxable income that exceeds $18,200 but not $37,000.
The second marginal tax rate increases from 30% to 32.5% on taxable income that exceeds $37,000 but not $80,000.
There will no longer be a separate tax scale for employees entitled to leave loading. These employees will no longer have higher withholding from every pay during their time at work. Employees will therefore be taxed more accurately when the leave loading is paid. Employers making leave loading payments as a lump sum will need to use the marginal tax rate for back payments, commissions, bonuses and similar payments.
Around 60% of taxpayers receive a minimum tax cut of $300 and no one will be required to pay more income tax.
Individuals can now earn up to $20,542 from 2012-13 without paying any net income tax.
One million low-income earners won't need to lodge a tax return from 2012/13.

Changes that impact businesses:

• From 1 July 2012, the small business instant asset write-off threshold has been increased from $1,000 to $6,500 GST exclusive and the depreciation rate for assets costing $6,500 or more GST exclusive included in the asset pool will be 30% (15% for the first year) even for assets with an effective life of 25 years or more. Some may advise to acquire an asset in July 2012 rather than June 2012 to take advantage of this accelerated up-front deduction.
• From 1 July 2012 and for cars only, where the cost is $6,500 or more GST exclusive, an immediate deduction can be claimed by small businesses for both the first $5,000 plus 15% of the cost less $5,000. The balance of the purchase price is depreciated as part of the asset pool at a rate of 30% in the second and subsequent years.
• From 1 July 2012, businesses in the building and construction industry need to report the total payments they make to each contractor for building and construction services each year. These payments need to be reported to the ATO via a taxable payments annual report.
• There is no reduction in company tax rate. The company tax rate only cuts to 29%. The 28% have been shelved, including the small business tax rate reduction to 29% that was due to start from 1 July 2012.
• Tax loss carry-back concession - From 1 July 2012, companies can carry back tax losses so they get a refund against tax paid in the previous year, providing a tax benefit of up to $300,000 per year. This loss concession is limited to $1.0m of company income/revenue losses, incurred from the 2012-13 income year, and may be carried-back only to receive a refund of income tax paid, in the previous one or two years as the case may be, that is represented by franking credits remaining in the a company’s franking account. The tax benefit is limited up to $300,000 per year. The tax benefit will not be received by a company until it has lodged its income tax return for the year it incurs the tax loss.
• Super Guarantee Increase Confirmed From 1 July 2013 - The Government confirmed the progressive increase of the super guarantee rate to 12% in this budget. The increase is due to start from 1 July 2013, starting at 9.5%, and progresses to 20% from 1 July 2019.

Please consult your accountant should you have any questions or need more information relating to any income tax matters.