The following changes take effect from 1 July 2010 to the individual tax rates (the changes are in bold):
Taxable Income ($ p.a.)
Nil to 6000
6001 to 35 000
35 001 to 80 000
80 001 to 180 000
180 001 plus
From 1 July 2010
Taxable Income ($ p.a.)
6001 to 37 000
37 001 to 80 000
From 1 July 2010: The Low Income Tax Offset (LITO) will increase to $1500 per annum (compared with $1350 in the previous year) giving a tax free income threshold of $16 000 for taxpayers with incomes up to $30 000 per annum in 2010–11 (compared with $15 000 in the previous year).
The LITO is no longer available once the taxpayer’s income reaches $67 500 in 2010–11.
With effect from 1 July 2009, the Government proposes to increase the low income Medicare levy threshold to:
In addition to the key changes outlined above, the following changes were also announced as part of the Federal Budget.
From 1 July 2012 the Government will provide individual taxpayers with an optional standard deduction of $500 in lieu of claiming work-related expenses and the cost of managing their tax affairs.
The standard deduction will be increased to $1,000 from 1 July 2013.
This measure is available to all taxpayers regardless of whether they have work related expenses or expenses related to managing their tax affairs.
In other words – under the current proposal any taxpayer can claim the standard deduction.
No taxpayers will be disadvantaged. Taxpayers with expenses above the standard deduction will be able to continue to claim those expenses when lodging their tax return under the existing rules.
what if my expenses are greater than the standard deduction?
All taxpayers will have the option to lodge an income tax return and continue to claim all their deductible expenses rather than the standard deduction being offered by the Government.
From 1 July 2011, the Government will provide individuals with a tax discount equal to 50% on up to $1,000 of interest earned, including on deposits held with any bank, building society or credit union, as well as bonds, debentures or annuity products.
This means that for a person earning an average pre-tax interest rate of 6%, the discount would apply up to a savings balance of just over $16,500.
This change will result in some individuals and families becoming eligible for transfer payments or eligible for a larger transfer payment, such as Family Tax Benefit, Baby Bonus, Child Care Benefit, Education Tax Refund, Commonwealth Seniors Health Card (CSHC) and the Pensioner Supplement (which is linked to eligibility for the CSHC).
The Government will make a number of minor amendments to improve the operation of the superannuation legislation, with intended effect from the 2010-11 income year.
The amendments will include:
Under the superannuation co-contribution scheme, the Government provides a matching contribution for contributions made into superannuation out of after-tax income. The matching contribution is up to $1,000 for people with incomes of up to $31,920 in 2009-10 (with the amount available phasing down for incomes up to $61,920). This measure will freeze these thresholds at $31,920 and $61,920 for two years.
The Government will permanently retain the matching rate for the superannuation co-contribution at 100% and the maximum co-contribution that is payable on an individual’s eligible personal non-concessional superannuation contributions at $1,000.
The following are the highlights of the Government’s response.
The measures that the Government has announced that it will implement that may affect individuals are discussed in more detail below.
The Government has decided to implement four changes to superannuation.
The first two changes apply to superannuation concessional contributions. The Government will introduce a new concessional contribution threshold for low superannuation balance workers aged 50 and over and it will also create a new Government contribution for workers who earn less than $37,000 a year.
The second group of measures impact on the superannuation guarantee charge scheme (SGC). The SGC will be increased up to a target level of 12% and it will now apply to workers below 75 years of age.
These changes are outlined in further detail below.
The Government has announced that it will increase the SGC to a maximum of 12% by the 2019/20 financial year. The charge will increase in increments as outlined in the table below.
Income year SGC annual rate Increase from previous year
SGC annual rate
Increase from previous year
2009-10 to 2012-13
The entitlement age for the SGC will be lifted for workers, with the cut-out age limit increasing from 70 to 75 years of age. This change will commence on 2013/14 and will align the SGC cut-out age with voluntary and self-employed contributions.
The concessional contribution cap will be doubled for eligible workers who are 50 years of age and older. Workers who are aged 50 or older and who have superannuation balances of under $500,000 will be able to make contributions of $50,000 per year (indexed annually according to Treasury).
The Government has referred to the measure as a "catch-up". This low balance cap applies from 1 July 2012 and effectively replaces the current transitional cap for workers aged 50 and older which expires on 30 June 2012.
A new Government contribution will apply to low income workers from 1 July 2012. The Henry Review recommended taxing all superannuation contributions as individual’s assessable income and providing an offset.
However, the new contribution is an offset that applies only to workers earning $37,000 or less. The contribution is calculated by applying a matching rate of 15% on concessional contributions made, with a maximum rebate of $500. This means that concessional contributions made by low income workers above $3,333 will receive no additional rebate amount.
The Government has promised that in the coming months it will have more to say on a number of areas considered by the review, especially making tax time simpler for everyday Australians, improving incentives to save and improving governance and transparency of the tax system. This would be done over the Government’s second term.
The Government noted that many everyday Australians find the personal tax system complex, and the overwhelming majority seek professional assistance to complete their annual tax returns. The Government is interested in exploring ways to reduce the burdens the tax system places on working Australians, while maintaining their access to the appropriate tax treatment of legitimate expenses. The Government will have more to say on this issue in coming months.
The Government also said that it is also important to move towards a system that improves how Australians interact with the tax and transfer system. The Government is interested in looking at how the tax and transfer system should operate into the future in a way that helps people and businesses make informed decisions that are in their best interests. These reform opportunities will be considered by the Government.
The specific simplification measures recommended by the Henry Review include:
Taxwise® News is distributed quarterly by professional tax practitioners to provide information of general interest to their clients. The content of this newsletter does not constitute specific advice. Readers are encouraged to consult their tax adviser for advice on specific matters.