Monthly PAYG instalments for medium and large companies
The Government introduced a three-year process to reform the timing of medium and large companies paying their income tax, moving from quarterly to monthly Pay As You Go (PAYG) income tax instalments.
This reform will be phased in over three years, with companies moving to monthly PAYG instalments:
* from 1 January 2014 for companies with a turnover of $1b or more,
* from 1 January 2015 for companies with a turnover of $100m or more, and
* from 1 January 2016 for companies with a turnover of $20m or more.
The company income tax rate and total tax paid by companies remain the same and will not be affected by this reform.
The Government states that this will better align tax payments with the way businesses pay Goods and Services Tax (GST) and making payments closer to when the income is earned, like wage and salary earners.
In accordance with the Media Release, the Government will release a consultation paper regarding this matter by early next year.
Date of effect – See above, depending on the company’s turnover
Reduction of Baby Bonus for second and subsequent children
From 1 July 2013, the Baby Bonus for second and subsequent children will be reduced to $3,000 (currently $5,000).
Baby Bonus is an income-tested payment. Subject to other criteria, Baby Bonus is payable if your family’s estimated combined adjusted taxable income is $75,000 or less in the six months after your child is born or enters your care.
Baby Bonus is not taxable.
Date of effect –1 July 2013
Indexing of Private Health Insurance Rebate
In the 2012-13 Federal Budget, the Government introduced a means test for the eligibility of Private Health Insurance Rebate, effective from 1 July 2012.
The government is further tightening its contribution to private health insurance by putting a ceiling over the Private Health Insurance Rebate.
The Government contribution will be calculated using commercial premiums as at 1 April 2013 and then indexed annually by the lesser of CPI or the actual increase in commercial premiums. The measure will take effect from 1 April 2014.
Date of effect –1 April 2014
SMSF levy reforms
In respect of self-managed superannuation funds (SMSFs), the Government announced an increase in the SMSF Supervisory Levy, from $191 to $259 per annum. The new rate is effective from 1 July 2013.
The Government also announced changes to the way this levy is collected. This levy is currently collected in arrears when the SMSF annual income tax return is lodged. Payment of the SMSF levy will be brought forward such that it will be levied and collected in the same income year. The change in the timing of the collection of the SMSF levy will be phased in over the two years 2013/14 and 2014/15.This will ensure consistency with APRA regulated funds, which pay the Superannuation Supervisory Levy in the same financial year it is levied.
Date of effect – 1 July 2013
Pensions following the death of a fund member
The Government will amend the law around pension exemptions on the death of a pension member.
In draft tax ruling TR 2011/D3, the Australian Taxation Office (ATO) took the view that if a fund member receiving a pension died with assets carrying unrealised capital gains, the pension would cease and the fund would face capital gains tax implications if the assets were then sold or transferred.
The amendment will allow the tax exemption for earnings on assets supporting superannuation pensions to continue following the death of a fund member in the pension phase until the deceased member’s benefits have been paid out of the fund.
This means that the tax-exemption on earnings and capital gains on sales of assets such as shares and real estate which were supporting the deceased member’s pension would continue after death as long as the death benefits are paid to beneficiaries in a timely manner.
The Government has announced that such measures are to take effect from 1 July 2012 but has not clarified its position for the five years between 2007 (when the ‘simplified superannuation’ rules started) and 2012.
Date of effect –1 July 2012
Removal of ASIC fee
From 1 July 2013, the Australian Charities and Not-for-profits Commission (ACNC) will assume the responsibility of monitoring and annual review of not-for-profit entities registered with the ACNC.
Therefore, the annual review fee that is currently charged by ASIC for corporations that are registered with the ACNC will be removed from 1 July 2013.
Date of effect – 1 July 2013
Fringe Benefit Tax
Removal of concessional treatment of certain “in-house” fringe benefits
The Government will remove the concessional FBT treatment for in-house fringe benefits if they are accessed by way of salary sacrifice arrangements.
This measure mainly targets reward systems under which employees are allowed to salary sacrifice and receive products or services that the employer provides. Apart from corporate products and services, this will also affect salary sacrifices to use corporate boxes at sporting events
This measure will apply from 22 October 2012 for salary sacrifice arrangements entered into from its announcement on 22 October 2012, and from 1 April 2014 for salary sacrifice arrangements entered into prior to its announcement on 22 October 2012.
Date of effect – 22 October 2012 for new salary sacrifice arrangements
1 April 2014 for pre-existing salary sacrifice arrangements
Goods and Services Tax
Reforms to the GST margin scheme
The Government confirmed that it will not proceed with the proposed restructure of the margin scheme provisions announced in the 2010/11 Budget. The Government further announced that it will proceed with the minor technical amendment relating to subdivided land.
Under the proposed amendment, extending the scope relating to subdivided land will ensure that taxpayers are able to use the consideration method, the valuation method, or the GST-inclusive market value method, whichever is appropriate, when calculating the margin on a taxable supply of subdivided land.
The amendment will apply from the first quarterly tax period after assent, rather than from 1 July 2012 as previously announced.
Date of effect – the first quarterly tax period after receiving royal assent
Tax Administration and Compliance
Commonwealth penalty unit to increase
To reflect inflation, the value of all Commonwealth penalty units is proposed to increase from $110 to $170, with effect from up to one month after the amending legislation receives royal assent.
This will affect penalty unit provisions in tax and tax-related laws. For example the late lodgment penalty for a company income tax return will increase from $550 to $850.
The amending Bill (Crimes Legislation Amendment (Serious Drugs, Identity Crime and Other Measures) Bill 2012) has been introduced to parliament on 10 October 2012..
Date of effect – One month after receiving royal assent
More budget for tax compliance
The government will provide $390m to the ATO to continue to improve overall compliance with the tax and superannuation system. This will allow the ATO to:
* continue strategic compliance initiatives to ensure Australians continue to pay their fair share of tax and that a level playing field is maintained for small business
* follow-up on long-term outstanding debts
* follow-up on lodgments for businesses, with two or more years of outstanding lodgments
* address the escalation in the promotion and participation in tax avoidance and tax evasion schemes in Australia, and
* target non-compliance relating to profit from criminal activities and organised crime.
For any queries regarding the taxation aspects of the MYEFO please contact Steve Fitzsimons here.
For any queries regarding the superannuation aspects of the MYEFO please contact Garvin Jones here.