After last year’s $44 billion budget deficit, Federal Treasurer Wayne Swan looked far more upbeat last night after delivering the news of an expected budget surplus in the 2012 -13 budget. Treasurer Swan delivered a budget that many are already referring to as the ‘budget for battlers’ with a real focus on family and one that is expected to deliver a surplus of $1.5 billion.

 The budget threw up a few surprises as always with one of the most significant being the Government’s decision to redirect the one percent company tax cut to families instead. The budget also gave financial detail to the Government’s plans for aged care, a National Disability Insurance Scheme and an increase to the Family Tax Benefit Part A.

 Whether you are happy with the budget or not will depend on your own personal circumstances but to save you some time we’ve sifted through the political spin and banter to bring you the facts in our Budget Breakdown.

 Here’s what you need to know:

 

Personal Taxation

• Tax Free Threshold

One of the most significant announcements made in the budget was that of the decision to more than triple the tax free threshold from $6,000 to $18,200, meaning that around 1 million Australian’s will no longer need to lodge a tax return. As an example, a person earning $50,000 a year will receive an extra $2,000 in their wallets for 2012 – 13.

•  The personal income tax rates for 2012 – 13 are as follows:

 • Taxable income up to $18,200: 0% rate

• Taxable income from $18,201 to $37,000: 19% rate

 • Taxable income from $37,001 to $80,000: 32.5% rate

• Taxable income from $80,001 to $180,000: 37% rate

• Taxable income over $180,000: 45% rate

 

Key Announcements: Tax Free Threshold

• Triple the tax free threshold from $6,000 to $18,200

 

 Families

• Family Tax Benefit Part A

The Government has allocated $1.8 billion to increase the Family Tax Benefit Part A and this will take effect from July 1, 2013. All eligible families with one child receive an extra $300 per year, and an extra $600 for families with two or more children. This move is expected to benefit around 1.5 million families. 

 

• Schoolkids Bonus

The Schoolkids bonus has been introduced in this budget and will replace the Education Tax Refund. At a cost of $2.1 billion over five years, parents with children in school will receive this twice yearly payment into their bank accounts. The proposed rate is $820 a year for each teenager in high school and $410 for primary school students.

 

• Supplementary Allowance

Those on income support will receive an additional $210 for singles and $350 for couples starting in March 2013. This will apply to recipients of Youth Allowance, Parenting Payment and Newstart Allowance.

 Single unemployed parents will also experience changed to their payments as a result of this budget with their parenting support removed once their youngest child turns eight. Under the previous system this payment was not removed until the child was 16.Unemployed couples with children will now stop receiving their $442 fortnightly payment once their youngest child turns six.

 

• Carbon Tax

The imminent carbon tax will cost the average household $9.90 a week. However, the Government will reimburse families $10.10 to cover the costs expected to be passed down by business.

 

Key Announcements: Families

• $1.8 billion to increase Family Tax Benefit Part A for all eligible families from July 1 2013
• $2.1 billion over five years on a new Schoolkids Bonus
• $1.1 billion for a new Supplementary Allowance for the unemployed, students and parents with young children, on income support, starting March 2013.

 

Disability:

One area of the budget being largely commended is that regarding funding for a National Disability Insurance Scheme (NDIS). With a commitment of $1 billion the NDIS will be rolled out over four years starting with the assessment of 10,000 eligible individuals from July 2013.

Key Announcements: Disability

• $1 billion over four years for the first stage of a National Disability Insurance Scheme
• 10,000 participants will start being assessed from July 2013, increasing to 20,000 from mid 2014

 

Aged Care:

One of the bigger winners in this year’s budget, the aged care system reforms aim to keep elderly Australian’s in their homes for longer. To facilitate this an extra 40,000 home care packages will be rolled out over the next five years. To read more about the aged care reforms, click here to read our more detailed article.

Key Announcements: Aged Care

• $3.7 billion dollar aged care reform package
• Increase number of Home Care packages by nearly 40,000 to nearly 100,000 over the next five years

 

Health:

The news that should have us all smiling… the budget has announced a $515.3 million investment to improve dental services and the associated workforce. The money has been allocated to help reduced the public dental waiting list which currently sits at 400,000.

 In addition to this the budget has allocated $475 million to deliver on 76 major new regional health infrastructure projects across Australia. A further investment of $61 billion has also been allocated to improve Australian’s health care system.

•  Net Medical Expenses Tax Offset

From July 1 this year, individuals earning more than $84,000 and couples earning more than $168,000 will face an increased threshold before being able to claim the offset. Where the threshold was previously $2,000, the offset threshold will increase to $5,000.

Key Announcements: Health

• $515.3 million to improve dental services and workforce
• Delivering 76 major new regional health infrastructure projects across Australia, worth $475 million
• Investing $61 billion in 2012‑13 in Australia's health care system
• An additional $19.8 billion in reforms to public hospital funding over the period to 2019‑20

 

Infrastructure

Infrastructure was not overlooked in this budget with several key infrastructure projects allocated with funding.  Key projects in South Australia and New South Wales will receive funding as part of a $36 billion investment in roads, rail and ports.

Key Announcements: Infrastructure

• $350 million per year for the Roads to Recovery Program
• Investing $36 billion in roads, rail and ports over six years to 2013 - 2014

 

Superannuation

Those classified as low income earners (those earning under $37,000) will also receive an increase of $500 to their superannuation savings.

 If however, you earn more than $300,000 it will no longer be possible to place money in your superannuation at the low tax rate of 15 per cent. High income earners will now have to pay 30 per cent on super contributions.

Key Announcements: Superannuation

• High income earners will now pay a 30% tax rate on their super contributions

 

Business Taxation

Businesses across Australia were braced for the one percent company tax cut but this goal failed to come to fruition. Instead the Government has pledged $3.7 billion to small business in other tax breaks.

 One such break included allowing companies to carry-back losses so they receive a refund against tax paid in the previous year. However, this system will only benefit a small percentage of Australian small businesses. Providing more of a break will be the fact that from July 1 small businesses (with a turnover of less than $2 million) will be able to immediately write off each business asset they buy for less than $6,500 and write off up to $5,000 for cars or utes.

 The Government will also be extending its Small Business Advisory Service program with $27.5 million over four years.

 Key Announcements: Business Taxation

• A $714 million loss carry-back scheme, allowing companies to carry‑back tax losses so they get a refund against tax paid in the previous year in 2012‑13, increasing to two years from 2013‑14, providing a tax benefit of up to $300,000 per year

• From 1 July 2012, delivering tax breaks for small business, like the increase to the instant asset write‑off threshold to $6,500

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'Living Longer. Living Better.' - this is the new catchcry of the Federal Government's $3.7 billion aged care reform package.

Announced only several weeks ago, on April 20, the new reforms seek to improve the level of access and care provided to our older Australians through a strengthened aged care workforce and better support for carers.

The reform package for the next five years has been broken down in the following ways:

• $1.9 billion for better access to aged care services
• $1.2 billion dedicated to strengthening the aged care workforce
• $268.4 million towards dementia and,
• $54.8 million to support carers

So, what does this reform mean for Australians?

The reform package looks at the aged care system in two different ways. Firstly, the package looks at the physical resources associated with aged care (eg: facilities and staff) while the second looks at how this care is distributed (home care and residential). It is how the latter that will have the most affect on Australians financially from July 1 2014 forward.

Home Care:

An aim of this series of reforms is to improve home care for elderly Australians so that more low care cases can stay at home for longer, leaving residential care for high care cases.

To help fund this initiative home care assistance packages will be doubled from $59,876 to around $100,000. However, unlike the current aged care system from July 1 2014, the elderly will be means tested and this will affect the overall level of assistance offered. The family home will be exempt from means testing.

The annual government subsidy will range from $7,500 to $45,000 and there will be increased spending in home care support programs.

Home care will be capped at $60,000 for a person's lifetime

 

Residential Care:

The aim of residential care will also be affected by the reforms and one of the biggest changes will come in the way that the elderly will be able to pay for this care.

As anyone who has dealt with the current aged care system would know, at the moment there is a bond system in place that usually sees most elderly Australians having to sell their homes in order to fund payment of the bond. However, under the new reforms people will now be able to pay for aged care through either a lump sum or periodic payment system. The result of this move is that fewer Australians will need to sell their home in order to fund aged care.

Like the changes to home care, residential care will also be subject to means testing from July 1 2014 meaning people with the same income and assets as other residents will pay the same fee. There will also be $486.9 million allocated by the government to supplement part or all the accommodation costs that cannot be met by some residents.

Like home care, residential care will be capped at $60,000 for a person's lifetime.

 

If you are a person who is either expecting yourself or a loved one to require aged care at some point in the near future, now is a good time to speak with your accountant or financial advisor to ensure you are financially equipped to handle these changes.

For more information about the aged care reforms, visit the government's information website at www.health.gov.au.

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Once again we have reached the time of year when savvy business people from across the Alice are turning their attentions to that little issue of tax planning.

Whilst tax planning does not sound like the most riveting of topics, failing to acknowledge this limited time service can cost your business more in the long run as it is tax planning that helps business owners anticipate their taxable income for the coming year and in doing so create their optimum tax position.

Tax planning is when your tax affairs are organised to give you the greatest tax advantage. It allows you to anticipate what your taxable income will be for the financial year, thereby allowing you to determine your tax liability in advance. The knock on effect of having such information is that you have the ability to plan ahead as opposed to being restricted from achieving the taxable income that you may want to achieve.

When you complete a tax planning service with your accountant they will be using your specific tax and business information to create a custom tax solution for you. When working with a reputable accountant, financial advisor or lawyer you can usually* rest assured that the work they are completing is legal and approved under Australian Tax Law.

So, why the asterisk?   We say ‘usually’ as in recent years the number of aggressive ‘tax schemes’ has appeared to be on the increase. Different from legitimate tax planning, a tax scheme is an artificial or contrived arrangement to avoid or defer tax obligations. Schemes often involve a series of complex transactions in order to avoid or minimise tax otherwise payable.  Schemes may also involve distorting the way funds are being used to enable a taxpayer to claim deductions they are not entitled to.

As a consumer it’s important not to fall for a tax scheme as if you invest in a dodgy tax scheme, you are risking your original investment plus you could have to pay back any missing tax with interest and penalties long after the promoter and your money are gone.

Having said that, most tax planning services offered by reputable accountants are legitimate and completed within the letter of the law but if you are ever in doubt about a tax scheme that seems too good to be true, contact the ATO.

When tax planning is completed legitimately it can have the ability to improve your wealth position by having a tax effective structure accompanied by sound tax planning advice.

HAS offers Results Tax Planning service, a once off service designed for businesses of every size and industry and completed in accordance with Australian Tax Law. If you are interested in finding out more we encourage you to contact us on 08 8951 0100 but you must act by May 31 this year, as after this date it is too late to implement any of the tax saving strategies.

 

 

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On Tuesday May 1, NT Treasurer Delia Lawrie announced the 2012-13 NT budget. The budget took particular focus on the areas of health, education, community safety and infrastructure with the overall aim supporting the NT economy and creating jobs for Territorians.

Expenditure in Budget 2012 has been broken down in the following ways:

• $1.2 billion for Health
• $1.3 billion for Infrastructure
• $850 million for Education and Training
• $450 million for Housing, Local Government and Regional Services
• $343 million for Police, Fire and Emergency Services
• $272 million for Justice
• $264 million for Business and Employment
• $177 million for Children and Families

So, if you are a Territorian, just what do these figures mean for you?

Infrastructure:

With investment of $1.3 billion in Infrastrucure, Budget 2012 aims to keep Territorians working and businesses open in what still is a tough economy. This sizable investment is expected to create 2,600 jobs and build better hospitals, schools and roads.

Investment in this area is split in the following way:

•    $607 million for the capital works program

•    $380 million for Power and Water Corporation’s infrastructure program

•    $217 million for the repairs and maintenance program and

•    $73 million for capital and repairs and maintenance grants.

 

Health:

With Budget 2012 wanting to pay particular attention to the area of health, significant investment was made in this area of $1.2 billion. Of this $1.2 billion, $553 million has been allocated to the upgrading of hospitals Territory wide and of this $147 million has been allocated to the Alice Springs Hospital.

Education:

$850 million has been invested into education and training initiatives. This spend will focus on increasing teacher rates in NT schools and improving school infrastructure.

In Alice Springs, we can expect the following:

 

• $73.99 million for primary school education in government and non‑government schools
• $31.33 million for senior years education and Vocational Education and Training in Schools in government and non‑government schools
• $25.7 million for middle years education in government and non‑government schools • $7.94M for preschool education in government and non‑government schools
• $2.86M for the provision of school buses and special needs transport for students
• $2.75M for isolated student education through the Alice Springs School of the Air and distance education
• $1.92M for early childhood programs including Families as First Teachers
• $0.57M to provide back to school vouchers of $75 per student

Community Safety:

With a continued focus on community safety, Budget 2012 will see $343 million invested to help increase police numbers Territory wide. A significant proportion of the $343 million will also be allocated to support educational programs like the Enough Is Enough alcohol reforms where $18.24 million has been allocated.

Central Australia will receive $47.39 million to provide police, fire and emergency services including nine police stations, two fire stations and twelve volunteer groups.

 

Home Buyers:

Home buyers will be happy to hear that Budget 2012 has included funding to extend the BuildBonus scheme until 30 June, providing a $10,000 grant to all homebuyers purchasing or building a home up to $600,000.

Indigenous Territorians:

Budget 2012 has allocated $433 million in infrastructure spend and $50 million over three years in partnership with Commonwealth Government to support employment programs in the bush.

Budget 2012 will also allocate $15.49 million for Charles Darwin University, Batchelor Institute of Indigneous Tertiary Education and other providers to deliver qualifications to Territorians. Territory and Commonwealth funds will also allocate $0.3 million for the Indigenous Training Employment Program to support employment for Indigenous Territorians of worling age in remote communities.

 

Local Business:

Small business was also considered in Budget 2012 with high infrastructure spending included and a focus on helping small business grow. The Territory remains the lowest taxing jurisdiction for small to medium business in Australia. Investment in this area will be split in the following ways:

•    The lowest recurrent taxes for small and medium sized businesses in Australia

•    $100  million towards training and apprentices to grow a skilled Territory workforce

•    $260 million infrastructure program for Territory roads and national highways, (a 165% increase since 2001)

•    $21 million to sell the Territory as a tourism destination ($0.75 million allocated to Tourism Central Australia); and

•    $64.9 million to develop industrial land.

It is also worth noting that $0.36 million has been allocated for the Territory Business Centre to provide business advice and information.

 

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Self managed super funds are becoming increasingly popular in Australia as they allow trustees of the fund a greater sense of control over their financial future, superannuation and retirement. However, with increased popularity comes a higher chance that some trustees will not pay enough attention to all the necessary requirements needed to run a SMSF and may find themselves facing hefty penalties.

As always the ATO will  be closely looking at SMSF's this tax time and now is a good time to look over your own SMSF to ensure that you have not fallen into the common pitfalls that often trip up SMSF trustees and members.

• Concessional Contributions Cap

By far the most common mistake many trustees make with their SMSF relates to the annual concessional contributions cap. The concessional caps trip up Trustees as  most SMSFs will have their financial administration tasks completed annually, and in arrears. This approach means that often Trustees will not know they have a member who has taken them over the cap until it is too late.

If in doubt about your own members it is essential to speak with your accountant or financial advisor as soon as possible to ensure you stay within the cap.

The caps are as follows:

To June 30, 2012
• Age under 50 - $25,000
• Age 50 - 74 - $50,000

From July 1, 2012
• All ages - $25,000

• Investment Errors

As you would have seen in our April Newsletter, trustees and members need to be extremely careful about what investments they include within their SMSF. Whether this is property, art, antiques or even a boat, what you class as part of your SMSF will affect it's value and as such will also attract hefty penalties if you fail to correctly classify these items in your SMSF.

• Exempt Current Pension Income

The exempt current pension income (ECPI) as the name suggests is a form of income earned from assets held by the SMSF that is exempt from income tax. The ECPI trips up many SMSFs when it comes to claiming deductions. Trustees will often attempt to deduct items like management or investment expenses against the ECPI.

 

While the above mistakes are common they are also avoidable if before starting your SMSF you take the time to understand what you can and cannot do with your self managed super fund. Understanding the long term objectives of your SMSF and speaking with your accountant prior to setting up your fund will go a long way in ensuring you do not face penalties down the track.

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From July 1 2012 the way that businesses in the building and construction industry report payments made to their contractors will change.

These changes were brought about as part of the ATO's crackdown on contractor compliance and aim to improve compliance with tax obligations by those contractors who are not currently doing the right thing. 

From the new financial year, businesses in building and construction will need to report the total payments they made to each contractor for building and construction services each year. These payments must be reported on the Taxable Payments Annual Report.

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In case you haven't heard, the government introduced changes to the private health insurance rebate and the Medicare levy surcharge. So, if you private health insurance now's a good time to take a look at these impending changes in preparation for their July 1 2012 implementation date.

In a nutshell, starting from the new financial year the private health insurance rebate and the Medicare levy surcharge will now be income tested against three new income tier thresholds. If you are a higher earner you can expect to receive less private health insurance or if you do not have private patient cover you can expect an increase to your Medicare levy surcharge.

The new tier structure can be seen by clicking here. As a general guide however singles earning less than $84,000 per year will see no change to their rebate or levy, same goes for families on less than $168,000. Only once your salary moves over these tiers should you expect differences when lodging your tax return.

For more information, visit the ATO website or call your accountant on 08 8951 0100.

 

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If you are a workaholic or trying to build up your savings, then you may be about to start working a second job. If this is the case, it's important to understand what the tax implications of this may be and understanding the tax free threshold.

When you first start your second job you will be required to complete a tax file number declaration (the same form that you would have filled in for your first job). Obviously the purpose of this form is to ensure that you are correctly reporting your tax and when filling this out for your second job you must pay special attention to the 'tax free threshold' section.

The tax free threshold exempts the first $6,000 of your yearly income from being taxed but you may only claim this from one employer at the same time. This means that if you have already claimed this with your current job you are not able to claim it again for your second job. The threshold should be claimed with the payer who pays you the highest salary. If you earn additional income from a second job then your other employer is required to withhold tax at a higher rate.

If you are not sure about the tax free threshold call HAS on 08 8951 0100 and speak with your accountant.

 

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Getting older is an inescapable fact and sure as night becomes day, so too will each and every one of us get older. Whether this excites or depresses you is of course your own opinion but what cannot be overlooked is the impact that age has on our financial and tax position.

While there is far more to life than just looking at financial matters, giving just a little consideration  to your age and researching the tax matters that may affect you can help you to maximise your financial position.

If you have a birthday soon, we recommend reading on to ensure that you are prepared for any changes that the tax man has coming up for you.

 

• Turning 18 soon?

While turning 18 will not cause huge changes to your tax position, there will be some small changes that you should be aware of.

From July 1 2012, as a minor any income you earn that is attributed to 'unearned' sources (for example a Trust distribution or interest) will see you miss out on the low income tax offset. If however, your income is generated through employment then you will still be entitled to the low income tax offset, just as those over 18 on low income will be.

The area of taxation and minors is likely to again be looked at in the May 2012/13 budget and if you are turning 18 after this, we recommend that you stay tuned for any further changes that may affect you.

 

• Turning 30 soon?

In your 30's tax policies will not be greatly different to those you experienced when you were 18. However, one area you should be looking at is the Lifetime Health Cover loading.

If you are soon to hit the big 3-0 now is the perfect time to start looking at taking out hospital insurance. If you do not have hospital cover on the 1st of July following your 31st birthday and then decide to take out hospital cover later in life you will pay a 2% loading on top of your premium for every year you are aged over 30. This is all part of the Lifetime Health Cover loading, a Government initiative designed to encourage people to take out hospital insurance earlier in life and maintain their cover.

As an example, if you decide to take out hospital cover when you are 40, you will pay 20% more than someone who took out hospital cover when they were 30.

The loading is up to a maximum of 70% and removed after 10 years of continuous insurance but the lesson here is, if you are considering hospital cover at any point down the track you are better off taking care of it before you turn 31!

 

• Turning 55 soon?

At 55 is where your age starts to have a real impact on your tax position. The mature worker tax offset, age pension and impacts on your super all start to change when you hit 55 and it's important to be prepared as financially a lot changes. Why 55? While there may not be an official retirement age in Australia, you normally must be 55 to access your super and take advantage of other senior benefits.

The Mature Age Worker Tax Offset (MAWTO) was implemented to encourage and reward mature age workers to stay in the workforce. MAWTO can reduce your tax liability but to be eligible you must be an Australian resident, aged 55 or over and have received some net income from working. The maximum tax offset is $500.

Should you decide that working is no longer what you wish you do, the Age Pension may be an option for you. Men can receive the Government Age Pension from age 65 and women from age 64. As with claiming any pension, you must also meet eligibility requirements.

It should also be noted that from 2023 the qualifying age for the pension will increase to 67

 

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Go back 50 years and the saying was, 'all work and no play makes Jack a dull boy.' Fast forward to 2012 and you can update that saying to read, "all work with inflexible working conditions and little down time to relax makes Jack unsatisfied, likely to look for new work and stressed.'

Not a great scenario is it?

However, as the work loads of people in Alice Springs and Australia continue to grow many Aussies are now finding themselves in the position where their work life is starting to overtake other areas of their life. A growing trend that has knock on implications for them, their families and even their employers.

A study by McCrindle found that work/life balance is the number one factor of job attraction and retention. Number one! Even above salary and promotional hopes. The results of this study suggest that workplaces that provide a flexible environment will win out in the employee department in the long run.

Whether you are an employee or employer it is important to recognise the value of good work/life balance factors and to be able to recognise the signs that working life may be starting to overtake other areas.

Employees that feel they do not have a good work/life balance are likely to display the following signs:

• Increased stress levels
• Dissatisfaction
• Withdrawn personality
• Lose 'team spirit'
• Increased chance of making mistakes
• Poor health

Research also suggests that when push comes to shove, the majority of workers will walk away from a job before the impacts on their personal lives become too severe.

As an employer, creating a workplace that provides flexibility will go a long way to ensuring you retain your best workers and that they continue to produce a high standard of work. Providing this flexibility does not mean in all cases that you necessarily reduce their work load, this can just mean providing options in the timelines and way in which this work is completed. For example, a working parent may appreciate being able to work from home or starting work earlier so they can finish in time to pick up kids from school.

It is also of value for every workplace to construct their own Employee Value Proposition (EVP). This formal document is drawn up between the employer and employee and outlines the mix of characteristics, benefits and ways of working within the organisation that the employee can expect in return for their contribution. Having a formal EVP is something to set you apart from your competition when vying for candidates.

If you are an employee, or even a business owner it is important to sit down and recognise the tell tale signs that you are feeling overworked and your work is being compromised. If your employer or business partners have not noticed than it is up to you to use your own initiative and bring the subject up for discussion. Most employers or co-workers will be responsive to your concerns and only then if they are not, is it time to consider alternative options for your employment.

A healthy work/life balance is essential for every worker and can be achieved through simple discussion and flexible working arrangements. Of course, a holiday to say Bora Bora or Hamilton Island wouldn't hurt either...

 

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