2010/11Federal Budget's Impact on Taxation

Some commentators are calling this budget "boring". In many ways it is.

There are no surprises and unless you earn super profits from mining or you are a smoker, much of the taxation initiatives were broadly expected. So here are the 2010/11 budget tax changes:

1.  Tax cuts from 1 July 2010:
  • Increase to Low Income Offset, effectively raising the tax free threshold from $14000 to $16000 for salaries up to $30,000
  • Increase in 30% tax threshold from 35001 to $37001
  • 38% tax rate will be reduced to 37%

2.  From year ended 30 June 2013, 50% discount on first $1000 of interest for everyone

3.  Tick and flick tax returns for 2012 onwards
  • System will work on an opt in basis – ie so workers can still claim expenses above the standard deduction.
  •  For y/e 30 June 2013 taxpayers will have the option of a $500 standard deduction for work‑related expenses and the cost of managing tax affairs to simplify their tax returns. $500 in deductions
  •  For y/e 30 June 2014 this will increase to $1000 deductions

4.  Increase in threshold for medical expenses tax offset from $1500 to $2000

5.  First home savings account - The Government's first home saver accounts, rolled out in Labor's first Budget in 2008, haven't been popular because of restrictions on withdrawals and lengthy time rules.

To apply for the tax break at the moment, savers are required to keep their money in an first home saver account for four financial years before they can use those savings to buy a home.

The first $5000 saved in the account gets a 17 per cent contribution from the Government. In a bid to improve the take-up of these accounts, today's changes allow money from the accounts to put towards a mortgage on a house bought during the four-year savings period.

At the moment, if the account holder buys a home during four-year period, the balance of their first home saver account can't be put towards the mortgage and has to be rolled into superannuation.

The changes will affect savers who buy houses after the proposed legislation is passed.

6.   Small business to receive cut to company tax rate from 30% to 28% for 2013/14

Copyright 2014. My Tax Zone.