The Federal Budget, announced on 11 May, includes a number of major spending initiatives to bolster the country’s expected economic growth. Of particular interest to the retirement village industry is the changes to superannuation for workers over 50 years of age.
Whilst the taxation measures were mainly repeats of what had already been recently announced, there were numerous small changes. Of potential concern for business will be the plan to boost GST audits and investigations. The Government expects to yield $2.7bn over the next four years from these efforts.
The RVA is disappointed with the outcome for older Australians and will be advocating for initiatives that will provide relief for older Australians that are looking to enter retirement villages.
“This would include incentives such as tax breaks on investment money for people that are looking after their own wellbeing through downsizing into appropriate dwellings and releasing their housing to young families (also assisting with housing affordability),” said RVA CEO Andrew Giles.
There is relief for workers and tax simplification. There will be a 50% discount on tax on the first $1,000 of savings income from 1 July 2011 and simplification will include providing individuals with an optional $500 tax deduction in lieu of claiming all work related expenses. This will start in the 2013 year.
However pre-retirees that are over 50 from July 2013 can continue to salary sacrifice up to $50,000 to superannuation if the balance is less than $500,000. If the balance is over $500,000, then only $25,000pa can be salary sacrificed (this includes Super Guarantee).
In summary the major initiatives of the budget are as follows:
- From July 2012, many Australians will have a “tick and flick” tax return.
- From July 2011, interest earned on savings accounts will attract a 50% tax discount (only on the first $1,000). For example, if you have $20,000 in a bank account earning 5%pa and you earn $90,000pa from employment, you would normally pay $385 in tax. You will save $192.50 in tax.
- Super Guarantee (that money that is locked up until age 55-60) which is currently 9%pa will be increased to 9.25%pa in July 2013 and make its way up to 12%pa by 2019.
- From July 2012, small businesses will be able to immediately write off assets valued at under $5,000.
- From July 2013, the company income tax rate will be reduced to 29%
- From July 2012, small businesses will pay tax at 28%. (Small business = assets less than $6 million and turnover of less than $2 million).
- Inflation is expected to be 2.5%pa over the next four years (Private Clients: our modelling has historically been based on 3%pa)
And from a macro point of view:
- The deficit is expected to be $57 billion this year, then $40 billion next year, then $13 billion and within three years we’ll be at $1 billion in surplus.
- 40% Resources Super Profits Tax to be imposed on miners from 2012.
- The major savings are expected from Super Profits Mining Tax ($12 billion), cigarette tax ($5 billion) and Disability Welfare Cheats ($127 million).
Read more about the 2010 Federal Budget.
ENDS
The RVA welcomes your feedback on this story and encourages you to leave a comment. You can submit your comment at the bottom of this post.
I look forward to more good info.