Significant changes in the ‘mini Budget’
21 December 2011
The Treasurer has announced a number of significant tax and superannuation changes as part of the Mid-Year Economic and Fiscal Outlook.
The main item from a tax perspective is the proposed reform of the living away from home (LAFHA) concessions which are intended to apply from 1 July 2012. The main features of the proposed changes are:
- Temporary residents will only be able to access LAFHA concessions where they maintain an Australian residence for their own use and are required to live away from this residence as part of their employment duties.
- Living away from home allowances will be included in the taxable income of the employee. The employee will be able to claim deductions for actual accommodation and food expenses incurred while living away from home, but these expenses must be substantiated (there will be an exception for food expenses up to a reasonable limit determined by the ATO).
- Reimbursements and payments of actual food and accommodation expenses by employers will still be exempt from FBT subject to new substantiation requirements.
The dependent spouse offset will also be restricted to taxpayers with a spouse born before 1 July 1952.
The Treasurer has also announced that the start date for a number of this year’s budget announcements will be deferred including:
- The standard $500 deduction for work related expenses will be deferred until 1 July 2013.
- The 50% tax discount on interest income earned will be deferred until 1 July 2013.
- The start date of the new tax system for managed investment trusts will be deferred until 1 July 2013.
- The proposed phase-down of interest withholding tax for financial institutions will be deferred until 1 July 2014.
There have also been a number of announcements made in relation to superannuation. These are summarised below:
- As previously announced, the low income superannuation contribution will apply from 1 July 2012 and effectively operates as a refund of tax paid on compulsory superannuation contributions made for individuals earning up to $37,000 per annum. Additional reforms have been announced with the aim of easing the administrative burden that could have been imposed by this measure (e.g., employees will not need to lodge a return or other form to benefit from this measure if they are not otherwise required to lodge a tax return).
- The superannuation co-contribution rates will be reduced from 1 July 2012 and eventually phased out.
- The indexation of the concessional contribution caps will be frozen for the year ending 30 June 2014.
- In response to the continued volatility in equity markets, the minimum payment drawdown relief of 25% for account-based pensions will be extended to the 2012-13 financial year to assist self-funded retirees.
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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.