12 May 2011
The Treasury has unveiled its fourth budget and most analysts agree it’s more a nip and tuck budget than the tough approach promised by Wayne Swan over the past few weeks.
Many of the measures were justified by the need to improve workforce participation and others were there to fulfil the promise to return the budget to surplus in 2012/13. Some measures were more cosmetic such as the temporary flood and cyclone reconstruction levy set to apply in the 2011/12 income year to people earning more than $50,000, which will add $1.725 billion to Government coffers over 5 years).
Other measures, however, may hurt families already struggling under the rising cost of living, particularly those in the construction and mining sectors.
The tucks to the tax system include changes to the family tax benefit system, phasing out the dependent spouse tax offset , encouraging single parents back into the workforce and removing the ability for minors to access the low income tax offset on unearned income in order to restrict income splitting.
Measures for small business provided no surprises, having been announced ahead of the Budget: the company tax rate reductions announced in the previous Budget remain intact as do some of the small business initiatives such as write offs for expenses up to $5000.
Some extra revenue has been gained by delaying the start of some broader (mostly green) reforms and infrastructure projects, and holding indexation at current levels for family payments.
In the superannuation area, reforms to the excess contributions tax regime may provide some relief (but not this year).
Some of the detail, such as the $5,000 write-off for small business to purchase a car (replacing the entrepreneurs tax offset), and the FBT changes were announced/leaked ahead of the budget. So, there were few surprises in this budget.
The elephant in the room was the carbon emissions trading scheme, or the lack of it. There is no detail beyond funding for an advertising campaign. This means that when the final shape of the emissions trading scheme is known, the Government will need to release an updated set of figures. For a government keen to show its green credentials, a mere $100 million was allocated for renewable energy and energy efficiency projects.
2011/12 Budget (PDF)
Cutting back Government allowances and spending on incentives
Budget winners and losers
Reforms to tax compliance
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.