Tax, super and Centrelink changes announced in the MYFEO

Changes across tax, super and Centrelink were announced today as part of the Government’s Mid-Year Economic and Fiscal Outlook (MYEFO). With a need to find cost savings, some concessions have been cut and others deferred for another year.

A summary of new announcements is outlined below. These measures are proposals and legislation still needs to be introduced.

Taxation measures

• 50% discount for interest income – commencement has been further deferred to 1 July 2013. When the measure was first announced in the 2010/11 Budget it was proposed to commence on 1 July 2011 but was then deferred to 1 July 2012 and now to 1 July 2013. If implemented, it will allow a tax discount of 50% on the first $1,000 of investment interest earned.
• Dependent spouse tax offset – from 1 July 2012, the offset will only apply for an eligible spouse born on or after 1 July 1952 (previously announced as 1 July 1971). The changes does not affect a person eligible for the zone, overseas forces or overseas civilian tax offsets or whose spouse is an invalid, permanently disabled or a carer.
• Standard work deductions - the commencement of the 2010‑11 Budget measure that provides a standard deduction for work‑related expenses and the cost of managing tax affairs will be deferred to 1 July 2013.

Superannuation measures

• Low income super contribution – this measure (originally announced in 2010/11 Budget) effectively refunds (into the super fund) up to $500 contributions tax for a person earning up to $37,000. Eligibility will be modified to include only those people who earn at least 10% of income from employment or business activities (same rule as co-contribution). It will not be paid if the amount is less than $20 or for temporary residents. The assessment requirements will also be streamlined so lodgement of a tax return is not necessary to receive the refund. The government will automatically assess eligibility from available information.
• Indexation of contribution caps – indexation of the contribution caps will not occur until at least 1 July 2014 with an announcement that the government will pause indexation of the concessional contribution cap in 2013/14. The government will also undertake further consultation on the changes to the concessional cap for people over age 50 from 1 July 2012. (Refer to separate Latest News story – Will concessional contribution caps ever increase)
• Co-contribution – from 1 July 2012 the co-contribution matching rate will be reduced from 100% to 50% with a maximum co-contribution of $500. This means eligibility will cut-out for people on adjusted taxable income of $46,920. (Refer to separate Latest News story – The super co-contribution takes another hit)
• Minimum payments from account-based pensions - The minimum payment factors will continue to be reduced by 25% throughout 2012/13. (Refer to separate Latest News story – Account-based pension relief extended)
• Trust deeds of super funds – clauses included in trust deeds that allow contributions to be returned will become void. These clauses have been used to allow the trustee to consider a contribution to not have been accepted and be returned where an excess contribution was determined.

Centrelink / Family measures

• Baby bonus – the Baby Bonus will be reset to $5,000 per child for babies born on or after 1 September 2012 (current rate is $5,437) and indexation of the payment will be frozen for three years from 1 July 2012. The Bonus will continue to be paid in 13 fortnightly instalments, with the first instalment of $846 and the balance paid in 12 fortnightly instalments of $346. This does not affect families who chose to claim the Paid Parenting Leave instead of the Baby Bonus.

Aged care measures

• Basic daily care fees – as part of the Carbon Tax compensation measures, pensioners will receive increased payments (refer to Latest News story  9/11/11 – Clean Energy Bills have passed Parliament). If the pensioner lives in residential aged care, this increase needs to be shared with the aged care provider so the basic daily care fee will increase to 85% of the single rate of basic age pension (up from 84%).