Impact of New Federal Government
The re-election of a minority Australian Labor Party (ALP) will have a number of consequences for our money. These is a summary of the election and policy promises which may be amended or rubbished as a result of the minority government being formed.
Labor has formed a Policy Transition Group (PTG) to consult with industry and provide advice on the implementation of the resource taxation reforms. The PTG will commence its work now that Labor has been re-elected. Further information on the PTG’s terms of reference and design principles of the resource tax reforms is available at this link
The re-elected Labor Government will allow small businesses to instantly write off assets costing up to $5,000 from 1 July 2012. In addition small businesses will receive a company tax rate cut to 29% from 1 July 2012, a year earlier than large companies. These measures were previously announced in the Government’s response to the Henry tax review.
Family Tax Benefits
Eligible families will be entitled to the following from 1 July 2011:
– $500 upfront payment of the baby bonus.
– Arrangements for the advance payment of family tax benefit will be simplified and made more flexible, with an overall maximum advance payment of up to $1,000.
Child care rebate
The Government will give families the option to receive Child Care Rebate (CCR) payments fortnightly from 1 July 2011. Families will also be able to choose whether or not they have their CCR paid directly to their child care service and receive an immediate fortnightly fee reduction, or whether they continue to receive the CCR directly.
Families who wish to continue to receiving the rebate quarterly will be able to do so.
Strengthening Corporate and Taxation Law
The Australian Securities and Investments Commission (ASIC) will be given increased powers and strengthened penalties to take action against companies that do the wrong thing.
Reforms will be introduced that target ‘phoenix’ company arrangements.
Response to Cooper Review on superannuation
The Government will work closely with the superannuation industry and employers to improve the administration of the superannuation system, including in making superannuation payments or finding lost accounts.
A full response to the Cooper Review will be released by the Government by the end of 2010, following further industry consultation; however, comments have been made in relation to other aspects of the Cooper Review, outlined below.
From 1 July 2013 the Government will allow super funds to offer a simple, low-cost superannuation product called “MySuper”. MySuper product providers will be required to meet standards, including:
· No entry fees, with exit fees limited to cost-recovery.
· A ban on commissions and conflicted remuneration structures in relation to retail distribution and advice in line with Government’s financial advice reforms.
· New duties that require superfund providers to deliver value for money or be stripped of their license by the regulator.
· A single, simple and easy-to-understand investment option designed to maximise a person’s retirement income.
· Standardised reporting requirements in plain English.
· MySuper funds will be licensed by APRA, who will also monitor and publish MySuper investment returns and costs;
· Anyone eligible to contribute to superannuation will be able to open a MySuper account.
Tax file number to be primary identifier for super accounts
The Government will introduce legislation to ensure that from 1 July 2011, the tax file number would be the primary identifier used to locate lost super accounts, consolidate super funds and to switch super accounts.
Labor will consult with industry on the implementation of the following measures:
· Employers to report actual Super Guarantee (SG) and salary sacrifice contributions on payslips;
· Funds to notify members and employers on a quarterly basis if regular contributions cease to be made;
· Enhance the enforcement powers of the ATO and Fair Work Ombudsman to ensure businesses pay their employees SG contributions.
Confirmation of response to Henry Tax Review
The Government has confirmed its position on the Henry Tax Review performs as follows:
· Increasing the superannuation guarantee to 12 per cent. The Government will also extend the superannuation guarantee to cover older workers up to age 75.
· Providing a new concession worth up to $500 for low income earners.
· Doubling the contributions cap to $50,000 from 2012-13 for people aged over 50 with super balances under $500,000.
Self-Managed Superannuation Funds (SMSFs) investments
The Government will allow SMSFs to continue to invest in collectables and personal use assets provided they are held according to new legislative standards. These standards will require these assets be stored according to new rules to prevent them from giving rise to a personal benefit. Existing assets that do not adhere to these rules will need to be sold within 5 years.
Work Bonus for pensioners
The Government will introduce improvements to the age pension Work Bonus:
· The Work Bonus will disregard every dollar of income up to $250 a fortnight, rather than the 50 cents in the first $500 arrangement that currently exists.
· Pensioners will also be able to build up any unused amount of their $250 bonus every fortnight for up to 12 months, up to a maximum $6,500. A pensioner could then earn up to $6,500 a year extra, through part-time or seasonal work, without it affecting their pension.
Greater protection on reverse mortgages
Through reforms to banking regulation and credit laws, the Government will:
· Extend protection for reverse mortgages and home reversion schemes, including greater disclosure of the features and fees on these products.
· Introduce a statutory protection against negative equity so consumers aren’t left with a debt significantly greater than the value of their property.
Veterans’ affairs – Out of pocket medical expenses
The Government will provide eligible veterans with a reimbursement for out-of-pocket pharmaceutical costs incurred from 1 January 2012. Reimbursement amounts will be calculated automatically and paid annually, with the first payment being made in early 2013 to reimburse out-of-pocket expenses for the 2012 calendar year. Eligible veterans do not need to make a claim.
Reimbursements will not affect pension payments.
The Fair Entitlements Guarantee
The Fair Entitlements Guarantee will protect redundancy pay, up to a maximum of four weeks for each year of service. This will replace the existing General Employee Entitlements and Redundancy Scheme (GEERS), which provides for a maximum of 16 weeks redundancy pay.
As a minority Government the one guarantee is that these positions will change. We will keep you updated as we hear more details.
Scott Malcolm (email@example.com) is Director of Money Mechanics (ph: 6257 5557) a fee for service advice firm who are authorised to provide financial advice through PATRON Financial Advice AFSL 307379.
The information provided on this article is of a general nature only. It has been prepared without taking into account your objectives, financial situation or needs. Before acting on this information you should consider its appropriateness having regard to your own objectives, financial situation and needs.