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Rose Partners Pty Ltd ABN 88 376 695 910
Level 5, 150 Albert Road South Melbourne Victoria 3205 T 03 9690 7299 E email@rosepartners.com.au
PO Box 293 South Melbourne, South Melbourne 3205 F 03 9690 9538 W www.rosepartners.com.au
2007/08 FEDERAL BUDGET REVIEW HIGHLIGHTS
The Treasurer handed down his twelfth Budget reporting a $10.6 billion surplus which is
almost directly in line with the forecast.
The tax cuts and rebates are directed towards lower and middle income earners
although from 1 July 2008 the top personal rate will only apply when income exceeds
$180,000.
From a business perspective this year’s Budget is largely a non-event. There are very
few significant changes for business apart from measures in relation to company loss
recoupment and tax consolidation which may advantage certain corporate groups.
BUDGET HIGHLIGHTS
Tax, superannuation and families
• Personal tax cuts of $31.5bn over four years from July 1.
• Low-income tax offset increases to $750 a year.
• Child-care benefit rates up by 10pc on top of indexation.
• Child-care tax rebate available as a direct payment.
• Low-income earners’ superannuation co-contribution doubled (one-off based on
2005-06 contribution).
Business
• Expanded access to 175pc R&D tax concession (cost of $200m over four years).
• Tax incentives for mining and infrastructure investments.
• Changes to finance lease rules, petroleum resource rent tax, tax consolidation rules.
• Measures to reduce tax-compliance costs for small business.
TAX CUTS
What’s in if for Individuals?
Personal Income Tax Cuts will be of most interest for Individual taxpayers. Examples of
the amounts of the tax cuts for varying income levels are shown below.
Directors Michael R Sojka, Glen Orfanidis, John Pham
smart thinking I business advisers I creating possibilities Associates Janet Chen, Benjamin Simon
Taxable Annual Tax Weekly Tax Annual Tax Weekly Tax
Income Saving Saving Saving Saving
2007-08 2007-08 2008-09 2008-09
$50,000 $750 $14 $- $-
$100,000 $750 $14 $500 $10
$180,000 $750 $14 $2,000 $39
PERSONAL INCOME TAX
Personal Income Tax Cuts
The budget has provided personal income tax cuts. These are in addition to those
previously announced in the 2006-07 Budget.
From 1 July 2007:
30% threshold will increase from $25,001 to $30,001
From 1 July 2008:
40% threshold will increase from $75,001 to $80,001
45% threshold will increase from $150,001 to $180,001
Current tax Tax rates New tax Tax rates New tax Tax rates
thresholds ($) (%) thresholds from (%) thresholds from 1 (%)
1 July 2007 ($) July 2008 ($)
0-6,000 0 0-6,000 0 0-6,000 0
6,001-25,000 15 6,001-25,000 15 6,001-30,000 15
25,001-75,000 30 25,001-75,000 30 30,001-80,000 30
75,001-150,000 40 75,001-150,000 40 80,001-180,000 40
150,001+ 45 150,001+ 45 180,001+ 45
Medicare Levy Low Income Threshold
From 1 July 2006, the Medicare levy low-income thresholds will be increased to:
• $16,740 for individuals;
• $28,247 for families;
• An additional $2,594 for each dependent child or student; and
• A threshold of $21,637 for pensioners below pension age.
Increase in Child Care Benefit Rates
From 1 July 2007 the rate of Child Care Benefit (CCB) will be increased by 10%, on top of
normal annual indexation. CCB is a subsidy paid to families to assist with the cost of
care. Families who are currently receiving CCB and those who are eligible for CCB in
the future will benefit from the CCB rate changes and will receive a total CCB increase
of more than 13%. Families will also benefit from the bringing forward of the payment of
the Child Care Tax Rebate.
Directors Michael R Sojka, Glen Orfanidis, John Pham
smart thinking I business advisers I creating possibilities Associates Janet Chen, Benjamin Simon
The measures mean that a low income family with one child in full-time Long day Care
(5 days a week) will be up to $20.50 better off a week. A family on maximum rate CCB
with one child in Long Day Care for 40 hours per week will receive an extra $16.40 per
week.
Child Care Benefit Rebate Changes
From 1 July 2007 the existing Child Care Tax Rebate (CCTR) will be converted to a direct
payment administered through Centrelink. The payment of the CCTR will be brought
forward and paid through the Family Assistance Office (FAO) at the end of each
financial year.
The CCTR covers 30% of out-of-pocket costs, up to a maximum of $4,000, plus
indexation. The change will benefit all working families who receive CCB for approved
child care. These families will now be able to receive a payment equivalent to 30% of
their out of pocket expenses up to $4,000 indexed per child per year for approved child
care at an earlier time. As a result, families will receive the CCTR as a direct payment,
soon after the financial year in which they incur child care costs.
The payments will begin from September 2007 for the child care expenses incurred in the
2006-07 year. Families will still receive a rebate for out-of-pocket costs incurred in 2005-
06 under the existing tax system arrangements. This means families with out-of-pocket
costs for both 2005-06 and 2006-07 will receive two rebates in 2007-08 potentially totalling
up to $8,000 (indexed) per child, i.e. one through the tax system, and one as a direct
payment. They will receive the first rebate as part of their tax assessment, while the
second will be received as a direct payment from the FAO. The Government will also
look at introducing regular payments throughout the year once the Child Care
Management System is in place.
Senior Australians - $500 One-Off Seniors Bonus Payment
A one-off non-taxable payment of $500 will be paid to each person qualified for Utilities
Allowance or Seniors Concessions Allowance on budget night. The person must have
been eligible for the benefit because of a claim made on or before 8 May 2007.
Payments will automatically be made by 30 June 2007.
Utilities Allowance is paid to income support customers who are of Age or Veteran
Pension age. It is also paid to people receiving Mature Age Allowance, Widow
Allowance or Partner Allowance. The person must be in Australia or temporarily absent
from Australia for no more than 13 weeks.
Senior Concessions Allowance is paid to Commonwealth Seniors Health Card holders
and to Veteran’s Affairs Gold Card holders of pension age. The person must have been
qualified for the card or would have been qualified had they not been temporarily
absent from Australia for a period not exceeding 13 weeks.
CAPITAL GAINS TAX CHANGES
GST Roll-Over – Marriage Breakdown
The Government has announced an extension to the existing CGT roll-over for assets of
small superannuation funds (complying superannuation funds with fewer than 5
members) on marriage breakdown.
This change is designed to facilitate complete separation of superannuation assets in
these situations and to provide greater choice of fund to the spouse whose interest is
transferred.
Directors Michael R Sojka, Glen Orfanidis, John Pham
smart thinking I business advisers I creating possibilities Associates Janet Chen, Benjamin Simon
Currently the roll-over only applies where there is a payment split under the Family Law
Act 1975 which results in an asset being transferred from a small superannuation fund in
which one spouse is a member to another small superannuation fund in which the other
spouse is a member.
Under the announced changes effective from 1 July 2007, one spouse in a marriage
breakdown will be able to roll-over their entire in specie interest in a small
superannuation fund to any other complying fund.
CONCESSIONS FOR RETIREMENT BENEFITS
Superannuation – Additional Government Co-Contribution
The Government will pay a one-off additional co-contribution into the superannuation
accounts of those persons who made eligible contributions on the 2005-06 income year.
In the majority of cases the additional co-contribution will be paid to superannuation
funds before 30 June 2007. Remaining amounts will be paid in 2007-08.
This payment will double the co-contribution paid in respect of the 2005-06 income year.
For example, if a person was eligible for a co-contribution of $1,500 in respect of the
2005-06 year they will now receive an extra co-contribution of $1,500 so that the total
co-contribution payments in respect of that year would be $3,000. If the person was
eligible for a $500 co-contribution in respect of the 2005-06 year they would receive an
extra co-contribution of $500, so that the total co-contribution payments in respect of
that year would be $1,000.
GST
The two main changes to the GST law announced in the Budget are aimed at reducing
GST compliance costs.
With effect from 1 July 2007, the turnover threshold for compulsory GST registration will
increase from $50,000 to $75,000 for all entities other than non-profit bodies. The turnover
threshold for non-profit bodies will increase from $100,000 to $150,000.
The other main change affects the requirement to hold a tax invoice in order to claim a
credit for GST paid on business acquisitions. Currently, a tax invoice is not required if the
GST exclusive value of the acquisition does not exceed $50. From 1 July 2007, that
threshold will increase to $75.
This change will benefit small businesses and big businesses alike by eliminating the need
to obtain a separate document for GST purposes in relation to low value acquisitions.
They will be able to use any existing document that satisfies the requirements for income
tax purposes.
The Government has continued the theme established in the 2006 Budget by allocating
a further $15 million to the ATO for GST compliance activities.
This additional funding is expected to generate an additional $65 million of GST revenue
over four years. It highlights the ATO’s ongoing focus on GST compliance, as evidenced
by the increasing number of GST reviews and audits that the ATO is undertaking.
Directors Michael R Sojka, Glen Orfanidis, John Pham
smart thinking I business advisers I creating possibilities Associates Janet Chen, Benjamin Simon
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