News: Federal Budget 2009: Personal taxation changes

First Home Owners Boost extended
Date of effect: Current

The First Home Owners Boost will be extended until 31 December 2009, but at a lower rate from 1 October 2009. Eligible first home buyers entering into contracts between 1 July 2009 and 30 September 2009 (inclusive) will receive a total of $14,000 for established homes and $21,000 for new homes.
Eligible first home buyers entering into contracts between 1 October 2009 and 31 December 2009 (inclusive) will receive a boost of $3,500 for the purchase of established homes and $7,000 for the purchase of new homes. When combined with the existing First Home Owners Scheme, eligible participants will receive a total of $10,500 for established homes and $14,000 for new homes during this period.

Paid parental leave scheme introduced
Date of effect: 1 January 2011

This Government funded scheme will apply to parents in respect of births and adoptions that occur on, or after, 1 January 2011.
The scheme will provide 18 weeks of leave paid at the ‘federal minimum wage', which is currently $543.78 per week. The payments under the scheme will be included in taxable income. To be eligible for the scheme, a parent in paid work must have:

• Worked continuously with one or more employers for at least 10 of the 13 months before the expected date of birth or adoption,
• Worked at least 330 hours in those 10 months, which is equivalent to around one full day of work each week, and
• An adjusted taxable income of $150,000 or less in the financial year prior to the date of birth or adoption of the child.

The scheme is in addition to any employer funded parental leave and will be available to contractors, casual workers and the self-employed.

Parents who receive paid parental leave will not receive the Baby Bonus (except in the case of twins or multiple births) or Family Tax Benefit Part B during the 18 week paid parental leave period.

People who elect not to receive paid paternity leave or who don't qualify will continue to receive the current forms of family assistance such as the Baby Bonus, where eligible.

SG will not apply to payments under the paid parental leave scheme, although this will be considered when the scheme is reviewed three years after commencement (in 2013).

Employee share scheme changes
Date of effect: 12 May 2009

Shares and rights issued as part of an employee share scheme will be taxed in the year of receipt. This means employees who receive salary through discounted company share packages will no longer be able to defer paying tax on the discount. Additionally, the current exemption for the first $1,000 of shares issued will be limited to people with an adjusted taxable income of less than $60,000.

Tax on foreign employment income changed
Date of effect: 1 July 2009

The exemption for certain foreign employment income earned by Australians working overseas for a continuous period of 91 days or more will only apply to income earned:
• As an aid worker,
• As a charitable worker,
• Under certain types of Government employment, or
• On projects that are in the national interest.

Other forms of foreign employment income will generally become taxable and taxpayers will be entitled to a foreign income tax offset for foreign tax paid on this income, which will relieve double taxation for these individuals.

Private health cover rebate and Medicare levy surcharge changes
Date of effect: 1 July 2010

The following private health insurance rebate and Medicare levy surcharge rates will apply to higher income earners in 2010/11 and future years:

For singles earning less than $75,000 and couples earning less than $150,000, the existing 30%, 35% and 40% private health insurance rebates for the respective age groups will remain.

Medicare levy low income thresholds extended
Date of effect: 1 July 2008

The Medicare levy low income threshold will increase to $17,794 (up from $17,309) for individuals and $30,025 (up from $29,207) for individuals with families from 1 July 2008. The threshold will also increase by $2,757 (up from $2,682) for each dependant child or student.

The Government will also increase the Medicare levy threshold for pensioners below Age Pension age to $25,299 (up from $22,922) with effect from 1 July 2008. This increase will ensure pensioners below Age Pension age do not pay the Medicare levy when they do not have an income tax liability.

Cap on extended Medicare safety net benefits introduced
Date of effect: 1 January 2010

A cap on Medicare benefits payable under the extended Medicare safety net will be introduced for a range of items with excessive fees, such as assisted reproductive technology items.

Family Tax Benifit Part A to be indexed by CPI
Date of effect: 1 July 2009

This measure will make FTB Part A consistent with other family payments, such as FTB Part B and the Baby Bonus. Currently, the maximum rate of FTB Part A for children under the age of 16 is benchmarked to a proportion of the combined couple rate of pension payments, or adjusted by the CPI, whichever is higher.

Pause to indexation of upper income thresholds of FTB Part A, FTB Part B and Baby Bonus
Date of effect: 1 July 2009

The upper income thresholds for family payments will remain at their current level until 1 July 2012. This includes:

• The FTB Part B primary earner income threshold, which will remain at $150,000,
• The income threshold for receiving the dependency tax offsets, which will remain at $150,000,
• The Baby Bonus eligibility threshold, which will remain at $75,000 of family income in the six months following the birth or adoption of a child (equivalent to $150,000 a year), and
• The higher income-free area of FTB Part A, which will remain at $94,316 of family income (plus $3,796 for each child after the first).

These thresholds would ordinarily be indexed by CPI.

Deductions for non-commercial losses removed
Date of effect: 1 July 2009

Excess deductions from unprofitable business activities (such as hobby farms) can no longer be used to reduce salary and wage income for those with an adjusted taxable income of more than $250,000.

Excess deductions for these taxpayers will be quarantined to the business activity. The existing rules will continue to apply to taxpayers with an adjusted taxable income of $250,000 or less.

Taxpayers will still have the ability to apply to the Commissioner of Taxation for relief from the rules if there are exceptional circumstances, or because the nature of the activities means a taxpayer is temporarily carrying on an uncommercial business but the activities they are undertaking are nonetheless independently assessed as commercially viable.

Personal income tax rate and threshold changes confirmed
Previously announced changes to the personal income tax rates and thresholds have been confirmed. These changes are highlighted in bold below.

Low income tax offset enhancements confirmed

The Government has confirmed the maximum low income tax offset will continue to increase progressively to reach $1,500 per year from 1 July 2010. As a result, the amount of tax-free income low-income earners can receive each year (and the upper limit to which a partial offset can be claimed) will gradually increase.

Tax-free incomes for older Australians

People aged 60 or over will still be able to receive unlimited tax-free incomes from pension investments commenced from a taxed super fund.

Small business tax break extended
Date of effect: 13 December 2008

The small business and general business tax break will be extended to allow a bonus deduction of 50% to small businesses with a turnover of less than $2 million that acquire an eligible asset between 13 December 2008 and 31 December 2009 where it is ready for use by 31 December 2010. The previously announced 30% and 10% bonuses continue to apply to all other businesses.