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Reduction of Concessional Contributions Cap from 1 July 2009
The concessional (taxed) contributions cap will be
reduced from $50,000 to $25,000 with effect from 1
July 2009. This cap will continue to be indexed. With
this measure being announced it is important for you
to review your salary sacrifice and transition to
retirement (TTR) income strategies to superannuation
arrangements to ensure you are not over the limits in
the new financial year.
The transitional cap for concessional contributions for those aged 50 years and over will also be reduced, from $100,000 to $50,000. This reduced cap will apply for the 2009/10, 2010/11 and 2011/12 financial years, after which individuals aged 50 and over will revert to the lower $25,000 cap (indexed). The transitional cap is not indexed. The non-concessional contributions cap will remain at $150,000 for the 2009/10 financial year, and will only increase when the new lower $25,000 concessional cap is increased by indexation. Going forward, the non-concessional contributions cap will be calculated as six times the level of the (indexed) concessional contributions cap. It is expected that the bring-forward provisions will continue to allow eligible individuals to make non-concessional contributions of up to $450,000 over a three-year period. The existing grandfathering arrangements that apply to certain members of defined benefit schemes in relation to the concessional contributions cap will continue. These arrangements will also be extended to certain persons who were members of defined benefit schemes on 12 May 2009. |
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Superannuation Co-contribution
The Government will temporarily reduce the matching
rate and maximum co-contribution that is payable on
an individual's eligible personal non-concessional
superannuation contributions, with effect from 1 July
2009. With this measure there may be advantage in
making co-contribution this financial year to take
advantage of the change in benefits for those earning
less than $30.342 per annum and up to $60,342
where the contributions phase out altogether.
The superannuation co-contribution matching rate will reduce from 150 per cent to 100 per cent for contributions made in the 2009/10, 2010/11 and 2011/12 financial years, and to 125 per cent for contributions made in the 2012/13 and 2013/14 financial years. The maximum co-contribution payable will be reduced to $1,000 for contributions made in the 2009/10, 2010/11 and 2011/12 financial years, and to $1,250 for contributions made in the 2012/13 and 2013/14 financial years. The co-contribution matching rate and maximum co- contribution payable will return to 150 per cent and $1,500 for contributions made in the 2014/15 and later financial years. |
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Extension of 50% minimum pension draw down relief from 1 July 2009
The Government will halve the minimum drawdown
amounts on account-based pensions for the 2009/10
financial year. This extends the drawdown relief
provided by the Government for the second half of
2008/09. This change is intended to assist pension
account balances to recover from capital losses
associated with the global recession.
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Announced Tax Cuts from 1 July 2009
In accordance with the tax cuts announced in last year's
budget, the new personal income tax thresholds for the
2009 - 2010 year will be as follows:
Income threshold | Tax Rate $0 - $6,000 | 0% $6,001 - $35,000 | 15% $35,000 - $80,000 | 30% $80,001 - $180,000 | 38% $180,000 + | 45% This is a change in 15% margin tax rate from $34,000 to $35,000 and a change in rate for the 40% marginal rate down to 38%. |
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Changes to income tax exemption for income earned by Australians Working Overseas from 1 July 2009
From 1 July 2009 foreign employment income derived by
certain Australians working overseas for a continuous
period of 91 days or more will become taxable income in
Australia. To avoid double taxation, taxpayers will be
entitled to a foreign income tax credit for any foreign tax
paid.
Currently foreign employment income derived by Australians working overseas for a continuous period of 91 days or more is exempt form tax in Australia. Importantly, this exemption will continue to apply to income earned as an aid worker, a charitable worker, under certain type of government employment or on projects that are in the national interest. |
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Increased Medicare Levy low income threshold from 1 July 2009
The Government will increase the Medicare levy low
income threshold to $17,794 for individuals and $30,025
for individuals in families. The additional threshold for
each dependent child or student will also increase to
$2,757.
The medicare levy threshold for pensioners below age pension age will also be increased to $25,299. This is to ensure that pensioners below age pension age will not have a medicare liability where they don't have an income tax liability. |
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Age Pension age to increase to age 67 from 1 July 2017
The qualifying age for the Age Pension and the
Commonwealth Seniors Health Card for men and
women will increase to age 67 years of age from July
2023. The Henry tax review report on retirement
income system also recommends aligning the
superannuation preservation age with this higher Age
Pension age but we have not yet seem this measure
introduced.
The qualifying age will begin to increase from July 2017, by six months every two years. |
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Increase in government support pension amount form 20 September 2009
From 20 September 2009, eligible pensioners will
receive an increase in the maximum rate of pension.
Singles will receive an increase of $32.49 per week,
comprising: a $30 increase in the base rate of the full
Age Pension, and a pension supplement of $2.49 per
week (paid fortnightly)
Couples will receive an additional $10.14 per week (combined) in the form of a pension supplement, paid fortnightly. From 20 September 2009, the maximum payment for single pensioners will increase from $304.19 per week to $336.68 per week and for pensioner couples from $497.36 per week to $507.50 per week. The Australian Bureau of Statistics (ABS) will develop a new Pensioner and Beneficiary Living Cost Index which will be used indexing the base rate of income support pensions paid by the Government. From 20 September 2009, the single rate of pension will be indexed at by the greater of: 27.7 per cent of Male Total Average Weekly Earnings (MAWTE); or the Consumer Price Index; or the new Pensioner and Beneficiary Living Cost Index. |
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Paid Parential Leave from 1 January 2011
A Government funded paid parental leave scheme will
be intorduced. The parental leave parment will be equal
to the federal minimum wage (currently $543.78); and
can be for up to 18 weeks.
The primary carer must have earned less than $150,000 (income test yet to be defined) for the financial year prior to the child's birth or adoption, and have satisfied a work test. The Baby Bonus will not be payable if claiming Paid Parental Leave. Neither will other family assistance payments, such as Family Tax Benefit Part B, dependent spouse, child-housekeeper and housekeeper tax offsets for the period the payment of the Paid Parental Leave. The payment will form part of the person's taxable income, and can be transferred to another caregiver if the primary carer returns to work. |
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Extension granted to First Home Owners Boost
The Government will extend the First Home Owners
boost for another six months.
Based on the contract date for purchase and whether the purchase is an established home or new home the First Home Buyers Boost will apply as follows: 1 July 2009 - 30 September 2009 | Established Home $14,000 | New Home $21,000 1 October 2009 - 31 December 2009 | Established Home $10,500 | New Home $14,000 After 1 January 2010 will revert back to $7,000 for new and established homes. |
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The information in this Budget Update has been
prepared by Money Mechanics Pty Ltd ABN 64 136
066 272 who is authorised to provide finanicial advice
through PATRON Financial Services Pty Ltd trading as
PATRON Financial Advice ABN 32 307 788 137 AFSL
307379. The information contained within is based on
the understanding of Money Mechanics based on the
budget announcements as at 12 May 2009. These
announcements are not yet Australian Government
Law.
The information provided in this newsletter is General Advice Only. It has been prepared without taking into account your objectives, financial situation or needs. Before acting on any advice you should consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. |
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