The Government has announced the first wave of reforms as a result of the recommendations announced in the ‘Henry Tax Review’. The winners are without doubt the lower income earners with concessions for superannuation and those aged 50 and over with balances less than $500,000 in superannuation. Outlined below is a brief review of the key Government announcements.
Increasing the superannuation guarantee to 12%
| Financial year | Superannuation guarantee (%) |
| 2013/14 | 9.25% |
| 2014/15 | 9.5% |
| 2015/16 | 10.0% |
| 2016/17 | 10.5% |
| 2017/18 | 11.0% |
| 2018/19 | 11.5% |
| 2019/20 | 12.0% |
The Government has announced that it will increase the superannuation guarantee (SG) rate from 9% to 12%, with increments of 0.25% in the first two years, and 0.5% thereafter. The increase will be phased in from 1 July 2013.
Superannuation guarantee to be provided to age 75 (up from age 70)
The Government has announced that it will raise the SG age limit from 70 to 75, with effect from 1 July 2013.
Government superannuation contribution for low-income earners
The Government has announced that individuals on adjusted taxable income up to $37,000 will have a 15% matching rate applied to concessional contributions made up to a maximum annual amount of $500.
A permanent increase in the concessional contribution cap to $50,000 per annum
The Government has announced that the transitional measure (due to expire 30 June 2012) afforded to contributors aged 50 years of age and over should remain permanently for those with account balances less than $500,000.
Company taxation
The Government has announced that it will cut the company tax rate to 29% from the 2013/14 financial year. It will then be cut further to 28% from the 2014/15 financial year. In a bid to assist small business companies the Government has announced that they will be eligible for 28% company tax rate from the 2012/13 financial year.
Further, the Government has announced that it will allow small businesses to immediately write-off assets valued at under $5,000, up from $1,000 currently. In addition, small businesses will be able to write-off other assets (except buildings) in a single depreciation pool at a rate of 30%.
Introduction of resource super profits tax
The Government has announced that the mining sector will be subject to a new 40% tax on their profits with effect from 1 July 2012 as opposed to the current royalty tax which is volume based rather than profit based. The Government believes that this change is necessary to ensure that non-renewable resources remain available over the long term.
What does the future hold?
There are several other key points that the Henry Review has recommended which many commentators believe will form part of the Government’s election campaign. These include:
- Simpler tax returns. The review has recommended that workers receive a ‘default return from the Australian Taxation Office which the taxpayer would be required to accept.’ However, for this system to work we would need to move away from itemised work deductions in favour of an automatic standard deduction system.
- Increase to tax-free threshold. The review also suggests increasing the personal tax-free threshold to $25,000.
- Tax incentives to encourage saving. The review also proposes a 40% discount on all income from savings, as well as on all residential rental income and losses, and capital gains. It is reasoned that because the current tax treatment is far less generous than the tax treatment of other investments such as shares and property, this encourages investors to take on too much debt.
