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The Government’s response to the Henry Review released at the beginning of this month was an anti-climax. The Government have released only the first phase of reforms and left the majority of the Henry Review recommendations untouched. This does not mean that we will not see any further reform; it’s just that there is no definitive timeframe for further announcements.
Some of the more aggressive reforms recommended by the Henry Review, and those likely to have an immediate budgetary impact, are yet to be acted upon. |
So what was announced?
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Reform |
Estimated start date |
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Phased reduction in the company tax rate to 28% by 2014/2015 |
1 July 2013 |
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Reduction in the company tax rate to 28% for small business entities (turnover under $2m) by 2012/2013 |
1 July 2012 |
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Instant asset write off and simplified depreciation – expands the capital allowance concessions available for small business entities (turnover under $2m) |
1 July 2012 |
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Incremental increases to super guarantee each financial year to reach 12% by 2019/2020 |
1 July 2013 |
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Superannuation guarantee age limit increased to 75 |
1 July 2013 |
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A higher ‘catch up’ contribution cap of $50,000 for those 50 and over with super balances less than $500k |
1 July 2012 |
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A superannuation contribution from the government of up to $500 pa for those on adjusted taxable incomes up to $37k |
Contributions from 1 July 2012 (paid from 2013/2014) |
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40% profits tax on non-renewable resources (Resource Super Profits Tax or RSPT) |
1 July 2012 |
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Refundable tax offset set at the company tax rate for exploration expenditure in Australia |
Exploration expenditure from 1 July 2011 |
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$700 m fund to be divided up among the states. Derived from the RSPT |
2012/2013 |
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No one should act on the reforms as announced as the Government will need to overcome a major political hurdle before any of the reforms become reality. All of the positive reforms in this first phase - such as the company tax changes, small business depreciation changes, and the extension of the concessional contribution caps – are funded by the Resource Super Profits Tax (RSPT). The RSPT capitalises on the resources boom and will see the Government increase its share from this sector by around $9 billion. If the Government cannot pass this new resources tax through Parliament, the other reforms may not come to fruition. |
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THE KEY CHANGES EXPLORED |
The material and contents provided in this publication are informative in nature only. It is not intended to be advice and you should not act specifically on the basis of this information alone. If expert assistance is required, professional advice should be obtained.
