Federal Budget 2012/2013

It's a mixed bag for individuals, with the government giving to those in lower-economic groups while deftly lifting from the purse of the better off. Be aware about what's being taken away.

Tax-free threshold tripled
As previously announced and legislated, the tax-free threshold for resident individual taxpayers has been tripled from 1 July 2012.   All taxpayers with a taxable income of up to $80,000 will get a tax cut, with most getting more than $300.  The Government estimates this will mean that one million people will no longer have to lodge a tax return and around 630,000 additional people will no longer have to pay any tax.  
Date of effect
From 1 July 2012
Golden handshakes targeted

The availability of the employment termination payment (ETP) tax offset will be limited.  From 1 July 2012, only that part of an affected ETP, such as a golden handshake, that takes a person's total annual taxable income (including the ETP) to no more than $180,000 will receive the ETP tax offset.

Amounts above this whole-of-income cap will be taxed at marginal rates. The whole-of-income cap will complement the existing ETP cap ($175,000 in 2012.13, indexed) which ensures that the tax offset only applies to amounts up to the ETP cap. The ETP tax offset ensures that ETPs up to the ETP cap are taxed at a maximum tax rate of 15% for those over preservation age and 30% for those under preservation age.
Existing arrangements will be retained for certain ETPs relating to genuine redundancy (including to those aged 65 and over), invalidity, compensation due to an employment-related dispute and death.
Date of effect
1 July 2012

Non-residents taxed more
The personal income tax rates and thresholds that apply to non-residents' Australian income will be adjusted.
From 1 July 2012, the first two marginal tax rate thresholds will be merged into a single threshold. The marginal rate for this threshold will align with the second marginal tax rate for residents (32.5%) and apply to all taxable income below $80,000.  From 1 July 2015, the same marginal rate will again rise from 32.5% to 33%.
Medical expenses offset means tested
The Net Medical Expenses Tax Offset will be means tested from 1 July 2012.    
For people with adjusted taxable income above the Medicare levy surcharge thresholds ($84,000 for singles and $168,000 for couples or families in 2012/2013), the threshold above which a taxpayer can claim the medical expenses offset will be increased to $5,000 (indexed annually thereafter) and the rate of reimbursement will be reduced to 10% for eligible out of pocket expenses incurred.  

Date of effect
1 July 2012

Medicare levy low-income threshold increased
The Medicare levy low-income threshold will increase to $19,404 for individuals and $32,743 for families for the 2011/2012 income year.
The Medicare levy threshold for single pensioners below Age Pension age will also increase to $30,451 for the 2011/2012 income year.
Date of effect
1 July 2011

Tax tip – Health insurance rebate
The Treasurer announced his intention earlier this year to phase out the 30% private healthcare rebate for singles with incomes
between $84,000 and $130,001, or families with incomes between $168,000 and $260,000. If you're tempted to let your health insurance lapse, there is a loophole that may just help you keep the rebate.

The Medicare Levy Surcharge (MLS) will hit once your income rises above these levels, however there may be a way to less for your health insurance despite the change in the rebate.

Contact your health insurance provider to discuss prepayment for your health insurance, as it may be possible to lock in both the rebate and potentially a discount for paying annually.

Of course you will need to do the maths about the MLS versus your cover as well as check your policy for what you're covered for, but while this loophole exists, it is worth talking to your insurance provider.

8 dependent offsets merged into 1
Eight dependency tax offsets will be merged into one non-refundable offset only available to taxpayers who maintain a dependent who is genuinely unable to work due to carer obligation or disability. Consolidated offsets include; the invalid spouse, carer spouse, housekeeper, housekeeper (with child), child-housekeeper, child-housekeeper (with child), invalid relative and parent/parent-in-law tax offsets.
The new consolidated offset is based on the highest rate of the existing offsets it replaces.
Date of effect
1 July 2012

Mature age worker offset phased out
The mature age worker tax offset will be phased out for taxpayers born on or after 1 July 1957. Access to the offset will be maintained for taxpayers who are aged 55 years or older in 2011/2012.
Date of effect
1 July 2012

Standard deduction for work related expenses abandoned
The 50% discount for interest income that was due to take effect from 1 July 2013 will not proceed.  In addition, the standard deduction for work related expenses which was also due to commence on 1 July 2013 has been scrapped.

Further exemptions from flood levy
Individuals who were eligible for an Australian Government Disaster Recovery Payment (AGDRP) in 2010/2011 will be exempt from the temporary flood and cyclone reconstruction levy even if they did not apply for and receive the payment, as required under the existing exemptions.
As announced by the Treasurer on 6 May 2012, the Government will also extend the exemptions from the flood levy to include those individuals who have been affected by a natural disaster in 2011/2012. The following people will be exempt from the levy:
  • Those who are eligible for an AGDRP for a disaster event in 2011/2012;
  • Those who are directly affected by a Natural Disaster Relief and Recovery Arrangements (NDRRA) declared disaster and would have met the AGDRP criteria in 2011/2012; or
  • New Zealand non-protected special category visa holders who received an ex-gratia payment from the Australian Government in relation to a disaster that occurred in 2011/2012.
Budget Details
Click through to the pages below for details about how the Budget affects you.

For the greater good
Tax Measures
Family & Community
Download the 2012/13 Budget Summary

Want to keep up to date with tax news for small business? Follow batescosgraveCA on LinkedinGoogle+ or Twitter

Last updated May 2012. This article is provided for information purposes only and should not be used in place of advice from your accountant. Please contact us on 02 9957 4033 to discuss your specific circumstances.

Follow Bates Cosgrave on Linkedin, Facebook or Twitter


This article is provided for information purposes only and correct at the time of publication. It should not be used in place of advice from your accountant. Please contact us on 02 9957 4033 to discuss your specific circumstances.

Share this

Get Small Business News each month

ChineseLanguage Select