The much talked about and speculated surplus has materialised. The Treasurer revealed a $1.5 billion surplus for 2012-13.

Here are the highlights

Individuals and families

• It was announced that the government would not proceed with the 2010-11 budget announcement to allow a standard deduction for work-related expenses and the cost of managing tax affairs.

• Similarly it will not proceed with another 2010-11 budget announcement for a 50% discount for interest income.

• People who suffered flood damage in 2012 will also be made exempt from the flood and cyclone levy that applies for the 2011-12 financial year only.

• From 1 January 2013 a new "no-strings” cash payment called the Schoolkids Bonus will be made to certain families with children at school. Each year families will receive the Schoolkids Bonus worth:

• $410 for each child in primary school
• $820 for each child in high school    

 This will replace the Education Tax Refund.

•  From 1 July 2012 the availability of the employment termination payment tax offset will be limited.

• Various dependant tax offsets will be consolidated into a single, streamlined refundable offset from 1 July 2012.

• From the 2011-12 income year the Medicare levy low-income thresholds will be increased for singles to $19,404 and to $32,743 for families.

• From 1 January 2013, the Government will limit the eligibility for FTB Part A to young people under 18 years of age or where a young person remains in secondary school, the end of the calendar year in which they turn 19.

• From 1 July 2013 the maximum payment rate of Family Tax Benefit Part A will increase by $300 per annum for families with one child and $600 per annum for families with 2 or more children. For families receiving the base rate of Family Tax Benefit Part A, the increase will be $100 pa for families with one child and $200 pa for families with 2 or more children.

• From 1 July 2012 the medical expenses tax offset will be means tested. For people with income above $84,000 for singles and $168,000 for couples or families the threshold above which a taxpayer may claim the medical expenses offset will be increased to $5,000. In addition the rate of reimbursement will be reduced to 10% for eligible out-of-pocket expenses incurred.

• From 1 July 2012 the mature age work offset will be phased out for taxpayers born on or after 1 July 1957. Access to the offset will be maintained for taxpayers who are aged 55 years or older in 2011-12.

• A new supplement for eligible income support recipients will be provided to assist with the cost of living pressures. The new supplement will provide $210 pa for eligible singles and $175 pa for each member of an eligible couple. .

• The maximum age of eligibility for the basic rate of ABSTUDY will be increased from 20 to 21 years and minimum age of qualification for the maximum rate of ABSTUDY will be increased from 21 to 22 years. Eligibility for the Youth Disability Supplement to ABSTUDY will also extend from 21 to 22 years. Existing recipients who are 21 years of age as at 1 July 2012 will continue to receive the maximum ABSTUDY rate.

• From 1 July 2012 a low income supplement of $300 will be available to people in low-income households who can show they did not receive enough assistance through tax cuts or other household assistance payments. People may be eligible for the supplement if they have annual adjusted taxable income of less than $30,000 for singles, $45,000 for couples and $60,000 for people with dependent children. You must be able to show that you either are not required to pay tax or required to pay tax of less than $300, and that for most of the year you did not receive another government payment.

Companies and trusts

• The proposed reduction in the company tax rate to 29% will not proceed.

• From 1 July 2012, companies will be able to carry back up to $1million worth of losses to get a refund of tax paid in the previous year. From 1 July 2013 companies will be able to carry back up to $1million worth of losses against tax paid up to 2 years earlier.

•  The proposed tax breaks for Green Building program will not proceed.

•  Further reform to the living away from home allowances (LAFHA) will be undertaken. The proposed changes will:

• Limit access to the tax concession to employees who maintain a home for their own use in Australia that they are living away from for work.
• Provide the tax concession for a maximum period of 12 months in respect of an individual employee for any particular work location.

 Superannuation

• From 1 July 2012 individuals with income greater than $300,000 will have the tax concession on their concessional contributions reduced from 30% to 15%. This means the tax rate on concessional contributions will effectively double from 15% to 30% for very high income earners.

• The proposed higher concessional contributions cap for individuals aged 50 or over with superannuation balances below $500,000 will be deferred from 1 July 2012 to 1 July 2014. All taxpayers, regardless of age, will be subject to a concessional contributions cap of $25,000 for 2012-13 and 2013-14 income years. From 2014-15 the cap is expected to increase through indexation.

GST

• The government will provide $193.3 million to the Tax Office to continue to promote voluntary GST compliance.
• Further changes will be made to legislation around GST cross-border transaction. Importantly, the government will not proceed with changes relating to non-residency agency provisions.

Other Taxes

• The CGT discount of 50% will be removed for non-residents on capital gains accrued after 7:30pm on 8 May 2012.

Other Measures

• From 1 January 2013, the period of time that people who travel overseas will continue to be paid government payments and benefits will be reduced from 13 weeks to 6 weeks for most income support and family payment recipients. The Age Pension will be excluded.

• The government is to align parenting payment eligibility for all recipients.

• ASIC will receive $180.2 million over 4 years to it can continue to provide strong and effective oversight of financial markets to protect retail investors and their retirement savings.

• From 1 July 2012, the Road User charge will increase from 23.1 to 25.5 cents per litre. This will reduce the fuel tax credit paid to eligible heavy vehicle operators.

• The application fee to obtain an Australian Financial Services licence will increase to:
• Body corporate $1,485
• Natural person $825

• The current microbreweries excise refund scheme will be extended by increasing the maximum refund amount from $10,000 to $30,000. In addition the current production eligibility threshold of 30,000 litres of beer will be removed.

• From 1 September 2012 the inbound duty free allowance for cigarettes and tobacco for international travellers aged 18 and over to 50 cigarettes and 50 grams of tobacco.

• From 1 July 2012 a package of measures that will make major changes concerning the aged care system, including new income testing to apply from 1 July 2014 will begin.

• The government will provide $14.6 million over 4 years to change the frequency of asset reviews for certain income support recipients from once every 2 years to once a year for those deemed to be most at risk of changes in the value of their real estate investments.

• The government will extent the transitional farm family payment program for another 2 years. The program provides eligible farm families experiencing hardship with up to 12 months of income support payments.

• The government will discontinue the $1,500 standard employer commencement incentive payment for existing work Australian Apprentices in non-national skills need list occupations, but will increase the standard completion incentive by $500 to $3,000.

If you would like to know more about the new budget, you can contact our office on 07 3233 6400, or send us an email.

The above Budget Summary is an extract from the Federal Budget 2012-13 summary prepared by the Institute of Chartered Accountants in Australia as published on their website – http://www.charteredaccountants.com.au.