New Government | Tax and Super Update
19 November 2013
The newly elected Abbott Coalition Government has moved quickly to honour key election promises by proposing a range of legislative changes and taxation measures to Parliament which the Treasurer Joe Hockey says will provide certainty to business and significantly reduce red tape and associated costs.
In honouring two key election commitments, the Coalition has:
- Introduced a package of carbon tax repeal bills and announced new powers for the Australian Competition and Consumer Commission (ACCC) to monitor prices and take action against businesses that attempt to exploit other businesses and consumers by charging unreasonably high prices or making false or misleading claims about the effect of the carbon tax repeal on prices.
- Introduced a bill to repeal the Mineral Resources Rent Tax (MRRT) and many of the associated tax concessions which were to be funded from the amounts raised by the MRRT.
The Treasurer also announced the Government’s plans in relation to a backlog of 96 tax and superannuation announcements from the previous Labor government which remain unresolved and unlegislated.
Four of the announcements have been addressed through the carbon tax and MRRT repeal bills and of the remaining 92, the Government will:
- Proceed with 18 initiatives;
- Significantly amend a further three initiatives;
- Not proceed with seven initiatives; and
- Consult with tax experts over the coming weeks on the remaining 64 measures.
Among the measures the Government will not proceed with are:
Tax on Superannuation Pensions
The Government will not proceed with Labor's announcement which would have taxed people's superannuation pension earnings above $100,000 in the draw‑down phase.
The Government believes the complexity and compliance costs associated with this initiative are extreme and essentially undeliverable and demonstrates their commitment to provide certainty for superannuation fund members by making no adverse unexpected changes to superannuation in the first term.
Car Fringe Benefits Tax Changes
The Coalition pledged not to continue with Labor’s FBT change on company or salary sacrificed vehicles, and has confirmed it will not proceed with this measure. This means that the statutory formula method for calculating the taxable value of car fringe benefits will remain an option into the future.
Self‑Education Expenses Cap
The Government will not proceed with Labor's announcement to put a $2,000 cap on the amount people can deduct as self‑education expenses, including training and educational courses, textbooks and other accreditation expenses.
The Government will proceed with 18 un‑enacted measures, including:
Net Medical Expenses Tax Offset (NMETO) phase out
The NMETO provides an offset for people when their medical expenses are high. The phasing out will allow current claimants to remain eligible for the offset until 2014‑15. Please note if you cease to be eligible for or simply cease to claim the offset in any year, you will not be able to claim the offset in a future year even if the phase out period has not expired.
The Government explains that support is provided for people with high medical expenses through Medicare safety nets. The NMETO provides no assistance to those with high medical expenses but no tax liability.
Farm finance – Support for farmers
The Government will support regional Australia by increasing the non‑primary production income eligibility threshold for Farm Management Deposits from $65,000 to $100,000.
Tobacco Tax Changes
One measure indexes the tobacco excise and customs duty to Average Weekly Ordinary Time Earnings (AWOTE) instead of the Consumer Price Index (CPI). Indexing to AWOTE means that it will increase at a faster rate. The indexation occurs twice a year.
The second measure implements four additional increases to tobacco excise and customs duty on 1 December 2013, 1 September 2014, 1 September 2015, and 1 September 2016.
The repeal of the Mineral Resource Rent Tax has significant flow-on effects for business as many of the tax concessions that were intended to be funded by the tax will be discontinued or re-phased.
Mineral Resource Rent Tax (MRRT) Changes
The ‘Minerals Resource Rent Tax Repeal and Other Measures Bill 2013’ was tabled in Parliament on 13 November 2013.
Under the proposed legislation, the MRRT will cease to apply after 30 June 2014 subject to a number of transitional and integrity provisions. Taxpayers will not accrue further MRRT liabilities after this date however the ATO will continue to administer and exercise powers under the MRRT for those years that it has applied.
The Treasurer said that the MRRT had collected a net $400 million in tax since 1 July 2012, barely one tenth of the amount that was foreshadowed when the legislation was introduced.
The measures that were intended to be funded by the MRRT that will be discontinued or re-phased include:
Loss carry-back measures
Recently enacted measures that allowed a company to ‘carry back’ its tax losses to up to two previous tax years up to a $1 million threshold will be repealed with effect from the start of the 2013-14 year. This means the rules will only apply to the income year ended 30 June 2013.
The bill provides that, from the 2013-14 income year, companies can only carry their tax losses forward to use as a deduction for a future year.
Changes to Capital Allowances
The MRRT repeal bill amends the instant asset write-off threshold provisions for small business entities.
The threshold value of a depreciating asset for the purposes of instant asset write-off provisions will be reduced from $6,500 back to $1,000 from 1 January 2014.
Depreciating assets that cost $1,000 or more can be allocated to the “general small business pool” to be depreciated at the current rate of 15% in the year of allocation and 30% in later years.
In addition, from 1 January 2014, motor vehicle purchases made by small business entities will no longer be eligible for an accelerated deduction of $5,000. This will mean that motor vehicles will become subject to the same tax write-off applying to other depreciating assets.
The changes to these capital allowance provisions mean that small businesses contemplating the acquisition of a depreciating asset costing less than $6,500 or a motor vehicle should consider acquiring the asset or vehicle prior to 1 January 2014 whilst ensuring that the eligibility conditions are met.
The bill seeks to delay increases in the superannuation guarantee rate for a two-year period.
The superannuation guarantee rate will remain at 9.25 per cent until 30 June 2016 and then rise to 9.5 per cent on 1 July 2016 and then in increments of half a per cent a year until it reaches 12 per cent on 1 July 2021.
The low-income superannuation contribution which provided payments of up to $500 to low income earners to top up their superannuation will be repealed from 1 July 2013.
Schoolkids bonus and Income Support bonus
The legislation provides for the repeal of the Schoolkids bonus and the Income Support bonus.
The Government faces stiff opposition in the Senate to some of its proposed legislation. This may mean that the legislation will not be enacted until the new Senate is in place from 1 July 2014.
If you would like further information about how any of the above taxation or superannuation changes impact you please contact your local Boyce Director.
Brian Wray | Senior Tax Consultant
Source: Hon Joe Hockey MP website http://jbh.ministers.treasury.gov.au/media-release/017-2013/; Institute of Chartered Accountants of Australia website www.charteredaccountants.com.au
Image courtesy of the Herald Sun