Henry Review in brief
There is still a lot of hysteria about the the Henry Review or more to the point the items the Government has chosen to adopt. The review made 138 recommendations but only a handful have been adopted and the rest appear to have been left alone. Although the mining "Super Profit Tax" has captured plenty of attention we should consider what won't be changing.
There will be no increase of the rate or broadening of the GST
Tax free superannuation payments for people over 60 will stay
There will be no removal of the benefits of dividend imputation
There will be no reductions to the CGT discount or applying of a discount to negative gearing deductions
There will be no changes that negatively impact on the not for profit sector including anything that involves affecting income tax to clubs or changing the benefits of tax concessions.
Personal income tax rates will remain as is
There will be no changes to stamp duties or payroll tax
For those of you with families
There will be no introduction of the family home into any means tests
There will be no introduction of a federal land tax for the family home
And for those of us who have enjoyed a long and happy life a bequest tax, more commonly called a death tax or duty is not on the agenda.
Of the items that have been adopted, clearly the mining Super Profit Tax (SPT) has generated the most debate. It has been suggested that its introduction is critical to the other adopted recommendations proceeding as it forms the basis of funding for these items.
The detail is complicated and many mining organisations are still digesting the ramifications. In a nutshell the tax starts July 1 2012 and is a 40% tax on profits. It is a tax payable on resource extraction activites. SPT paymets will be deductible for income tax purposes but SPT refunds will also be assessable for income tax purposes. Exploration costs will be immediately deductible under the SPT.
There will be a reduction in the company tax rate to 28%. Businesses classifed as "Small Businesses" (what constitutes a small business is yet to be stated by the government) will have the reduced tax apply from the 2012/13 financial year. Other business will have a reduction to 29% in the 2013/14 year and then 28% in the 2014/15 year. There are ramifications here for Franking Credits, PAYG Installments and Top Up Tax.
Small businesses will be able to write off assets costing under $5000 in the year of purchase effective from 1st July 2012. The query again is the definition of "Small Business". Other areas affected are Depreciation Pools and Division 43 Building Allowances.
There will be changes to superannuation. The biggest is the increase in the Superannuation Guarantee from 9% to 12% on a gradual basis from 2014 to 2020. One of the ramification under current circumstances is that payroll tax and workcover costs would increase as these are calculated on remuneration inclusive of superannuation. Other super changes are an increase from age 70 to 75 for the Super guarantee age limit and the concessional super cap is to continue beyond 2012 for indivuals with a super balance below $500,000
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