How much of what was announced in the budget will actually become law?

Given that this is an election year with the current government’s chances of being re-elected are low, that is the question in everyone's mind.  As it was expected budget deficit, disability scheme and spend on education etc.  are confirmed.  I shall not go into the macro economic items, but will focus on what are the tax, super and other changes that impacts businesses and independent contractors.


Highlights for Businesses and Contractors

Medicare and Medical Expenses

• Medicare levy to go up from 1.5% to 2%. Medicare levy surcharge to stay the same.

• No more not medical expenses tax offset - Currently, if you spend more than $2000 out of pocket on medical expenses (that is, after any health fund payments), you can claim 20 per cent of the total as an offset.  That will be phased out gradually from next year, so 2012-2013 will be the last year you can claim it.
  
    

Baby bonus to be abolished and replaced with a drastically reduced payment that will be combined into the Family Tax benefits A. Most professional contractors will no longer be eligible for the same given that Family Tax benefit A are income tested.

 

Superannuation Changes

• The compulsory super guarantee rate will be gradually increased from 9% to 12% over seven years. The first increase from 9% to 9.25% will kick in from 1 July 2013.   Also, employers will need to contribute to super for employees aged 70 years old and over.

• From 1 January 2014, the default fund of the employer should offer a 'MySuper' product.
• Those earning more than $300,000 per year will have to pay 30% superannuation contribution tax as against 15%.

• Individuals who exceed the superannuation threshold limit will be taxed at marginal rates rather than top marginal rate.

• Superannuation concessional cap to increase to $35,000 from 1 July 2013 for people aged 60 years old and over and from 01 July 2014 for people aged 50 years old and over.

Individuals

• Work related self education expenses to be capped at $2000 per year.

• No more discounts for up-front university fees.

• No changes to personal income tax rates. 

• No changes to capital gains for residents.

• Child Care rebate cap stays at $7500 per child.

Foreign Workers

• 457 visa application fees to increase to $900.

SME and Corporate Tax

• R&D Tax concession to be limited, however an innovation funding and a tax payer backed venture capital style funding to be available to stimulate entrepreneurial activity.

• Corporate tax to stay at 30%

• No major impacts to SME's

Author:  Raj Sesha

Tax Agent and Director SDP Solutions

The above information is a general summary of the budget and for any specific advise please call me, Raj Sesha, on +61 2 9233 2233.

www.sdpsolutions.com.au

link to article: http://sdpsolutions.com.au/2013/05/15/how-much-of-what-was-announce...