Australian Federal Budget 2010 – Personal Tax Changes
ByNo real surprises for personal income tax payers in the federal budget. Highlights…
- Income Tax rates reduced as expected (only affecting incomes greater than $35,000 per annum)
- “Simple” tax returns proposed from 2012-13 will let people claim a standard $500 ($1,000 from 2013-2014) deduction for work-related expenses and the cost of tax affairs
- A 50% tax discount on the first $1,000 of income generated by products such as cash accounts, fixed interest and annuities to apply from 1 July 2011
In more detail…
Personal Income Tax Rates
The Budget confirmed the following, already enacted, personal tax rates and thresholds that will apply from 1 July 2010:
| Rates For Tax Year 2009-10 | Rates For Tax Year 2010-11 | |||
| Taxable Income ($) | Rate (%) | Taxable Income ($) | Rate (%) | |
| 0-6,000 | 0 | 0-6,000 | 0 | |
| 6,001-35,000 | 15 | 6,001-37,000 | 15 | |
| 35,001-80,000 | 30 | 37,001-80,000 | 30 | |
| 80,001-180,000 | 38 | 80,001-180,000 | 37 | |
| 180,001+ | 45 | 180,001+ | 45 | |
Here’s what those changes mean in actual savings for individual taxpayers…
| Effect Of Changes To Personal Income Tax Rates | |
| Income ($) | Tax Saving 2010-11 ($) |
| Up to 35,000 | Nil |
| 35,001 – 37,000 | 0-300 |
| 37,001 – 80,000 | 300 |
| 80,001 – 180,000 | 300 – 1,300 |
| 180,000 + | 1,300 |
Personal Tax Offsets, Rebates And Thresholds
Also announced in the budget were the following adjustments to personal income tax offsets and rebates that take effect from 1 July 2010:
- Confirmation of the previously announced increase in the maximum amount of the low income tax offset (“LITO”) from the current $1,350 to $1,500.
- An increase in the threshold for the 20% net medical expenses offset from $1,500 to $2,000.
- An increase in the Medicare levy low-income threshold to $18,488 for individuals and $31,196 for individuals who are members of a family.
- The government will cap the child care rebate for out-of-pocket childcare costs at 50% of costs up to $7,500 per annum. No indexation of the cap for a further 4 years.
Standard Deductions
The government proposes to introduce a standard deduction for work-related expenses and for the cost of managing tax affairs. For 2012-13 the standard deduction would be $500, increasing to $1,000 from 2013-14 onwards.
Taxpayers with deductible expenses greater than the standard deduction amount would be able to continue to claim their actual expenses instead.
Tax Preferred Saving Accounts
It is proposed that from 1 July 2011, a 50% tax discount will be available on up to $1,000 interest earned by individuals, including interest earned on deposits held in authorised deposit taking institutions, bonds, debentures and annuity products.
The deduction will be available for interest income earned directly, as well as indirectly, such as via a trust or managed investment scheme.
Capital Protected Borrowings
A retrospective increase of 1% has been proposed to the benchmark interest rate used to determine the deductible interest on capital protected borrowings. The rate in now the Reserve Bank of Australia indicator rate for standard variable home loans plus 1%.
The increased rate applies retrospectively to capital protected borrowings entered into from 7:30 pm (AEST) 13 May 2008. The transitional arrangements for capital protected borrowings entered into before this time has been extended to 30 June 2013 (from 13 May 2013).
First Home Savers Accounts
Some small changes to the First Home Savers Accounts (“FHSA”) scheme have been announced to increase flexibility. It is proposed that savings in a FHSA can now be transferred to an approved mortgage at the end of a minimum qualifying period, rather than being paid into a superannuation account.
