Compared with previous years, the 2011 Federal Budget was relatively mild; with few surprises or major changes. The Gillard Government, handing down its first Budget, confirmed a range of previously announced tax, super and social security policy changes.

Note: Unlike previous years, this Budget was delivered by a minority Government that may find it more difficult than usual to get some of these measures through both Houses of Parliament.

For your convenience, we have provided the below summary of some of the items in the budget. If you wish to read a full 13 page report on the budget please click here: Securitor Federal Budget Report.

Overview

On 10 May 2011, the Federal Government handed down its Budget for 2011/12.

Despite largely having been announced previously, most measures will still need legislation to be introduced, so the final version of the changes may differ to the announcements made in the Budget. As with all changes, it is important that you speak with your financial adviser to determine how these announcements will impact on your personal situation.

Personal tax rates

Effective date: not applicable as no change

For the first time in eight years, no changes have been announced to personal income tax rates, thresholds or tax offset amounts for future income years. Until further advised, personal income tax rates and thresholds will remain at the levels in the following table, and the low income tax offset will remain at a maximum of $1,500.

Flood and Cyclone Reconstruction Levy

Effective date: 1 July 2011

The Government reaffirmed the implementation of the temporary Flood and Cyclone Reconstruction Levy in the Federal Budget. The levy will apply to taxable income included in both resident and non-resident individuals’ tax returns for the 2011/12 financial year only.

The table below outlines the income thresholds and rate of levy applicable.

The table below shows the amount of Flood Levy payable for the 2011/12 financial year for a range of taxable incomes.

Certain individuals will be exempt from paying the Flood Levy. These are persons who have a taxable income of $50,000 or less for the 2011/12 financial year or those who are in receipt of an Australian Government Disaster Recovery Payment from Centrelink for a declared natural disaster that occurred during 2010/11.

Refund of excess concessional contributions

Effective date: 1 July 2011

Currently if a superannuation member exceeds their concessional contribution cap they are subject to excess concessional contributions tax of 31.5%. This is in addition to the 15% contributions tax. This liability may be paid from the superannuation account or paid by the member. This measure has impacted a considerable number of contributors, particularly those who inadvertently breached the cap.

The Government has announced that from the 2011/12 financial year and onwards, if a person breaches the concessional contribution cap by less than $10,000 (not indexed) they will have the option to have the excess contributions taken out of their superannuation account and assessed against their marginal tax rate, rather than incurring the additional 31.5% excess concessional contributions tax. This measure will only apply once and to breaches in the 2011/12 financial years and onwards. This measure will ensure that the most a person will pay on an excessive concessional contribution (within the $10,000 limit) will be at their marginal rate of tax as opposed to the top marginal rate of tax.

Reduction in the minimum payment amounts for account-based pensions in 2011/12

Effective date: 1 July 2011

The Government initially provided a 50% pension draw down relief in the 2008/09 financial year to assist account based pension holders to recoup capital losses experienced as a result of the global financial crisis. This measure was extended for the 2009/10 and 2010/11 financial years. The Government proposes to phase out this drawdown relief by reducing the minimum pension payment by 25% for the 2011/12 financial year. For example a 64 year old would be required to draw 3% of the account balance as a minimum pension payment instead of the standard minimum of 4%. For the 2012/13 financial year onwards, the standard minimums will operate.

Changes to government co-contribution

Effective date: 1 July 2012

In last year’s Budget the Government announced that the thresholds applying for co-contribution eligibility will be frozen for 2010/11 and 2011/12. As a result, the maximum co-contribution is only available for those with income levels of up to $31,920, and no co-contribution will be available once the individual’s qualifying level of income reaches $61,920.

In this year’s Budget, the Government has announced that the threshold limits will be frozen for an additional 12 months, now covering 2012/13.

Operation of the higher concessional contribution cap for over-50s

Effective date: 1 July 2012

From 1 July 2012 individuals over 50 who have a superannuation balance of less than $500,000 will have the ability to contribute up to $50,000 of concessional contributions. Earlier this year the Government released a consultation paper seeking comment on the application of this previously announced measure. Currently it is unclear how this measure will operate.

Baby Bonus

Effective date: 1 July 2011

The Government has announced an increase in the proportion of the Baby Bonus that can be received as an upfront payment. Baby bonus claimants who become eligible on or after 1 July 2011 will be able to receive $879.77 out of the total of $5,294 (per child) upfront in the 2011/12 year. In subsequent years the amount will be 16.18% of the total baby bonus.

Paid Paternity Leave Implementation Date

Effective date: 1 July 2012
The measure to provide eligible working fathers or other partners who provide a child care with two weeks leave paid at the minimum wage has been deferred from 1 July 2012 to 1 January 2013 for children born on or after 1 January 2013.

Child Care Assistance – Awareness Campaign

Effective date: 1 July 2011
The Government will fund an awareness campaign to ensure eligible families are aware of current child care assistance available. In addition to this, the government will communicate the availability of fortnightly payment of the child care rebate from 1 July 2011.