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Highlights of the 2010 Federal Budget

Wilson Luna

Having a budget is important, but it’s just as important to know how well it’s doing so you can make any necessary adjustments to your money management and make the most of your money. Doing this when it comes to your personal budget is pretty easy – after all, nobody knows your money better than you do. But when you’re talking about the Federal Budget, things start getting a bit more difficult. Let’s face it: the Federal Budget is a bit too complicated to stick up on the fridge where you can keep an eye on it! We can’t possibly deal with all the topics it addresses here, but it is important that you understand the parts of it that are likely to affect your family so you can adjust your budget and money management plans accordingly. So we decided to keep it simple and show you a snapshot of some of the ways the latest Budget might change the way you handle your finances.

What's new for personal income tax?

• Investors in authorised deposit taking institutions, bonds, debentures and annuity products, whether individually or as part of a managed fund, will be eligible for a 50% tax discount on up to $1 000 of interest earned from 1 July 2011.

• To simplify the tax system, a standard deduction of $500 will apply to work-related expenses and the cost of managing tax affairs from 1 July 2012, increasing to $1 000 from 1 July 2013. Taxpayers who want to claim a greater deduction will still be able to claim their higher expenses in lieu of the standard deduction.

• The increase in the maximum low income tax offset to $1 500 per year from 1 July 2010 has been confirmed. Thus the amount of tax-free income low-income earners can receive each year will increase to $16 000, and the upper limit to which a partial low income tax offset can be claimed will increase to $67 500.

• The Government confirmed its commitment in last year’s Federal Budget to reduce income tax, but because there are so many variables to consider here, you’ll need to see your financial adviser to find out how this will affect you.
  

Changes for health care and child care

• The net medical expenses tax offset of 20 per cent will apply to net medical expenses above a threshold of $2 000 in 2010 and 2011. This threshold will be indexed to the Consumer Price Index, starting 1 July 2011.

• The annual Child Care Rebate will be capped at $7 500 per child. This is a reduction from the current cap of $7 778. Indexation will be paused for four years from 1 July 2010 and out-of-pocket expenses will continue to be rebated at 50% of the annual cap.
  

New superannuation strategies

• The super guarantee (SG) rate will increase gradually from 9% to 12% from 1 July 2013.

• The SG contribution age limit will increase from 70 to 75 from 1 July 2013.

• A Government super contribution of up to $500 per annum will be made for people earning up to $37 000 per annum from 1 July 2012.

• The Government will permanently retain the matching rate for the super co-contribution at 100%, and the maximum co-contribution payable on after-tax super contributions will continue to be $1 000.
  

Breaks for business

• The company tax rate will gradually reduce to 28% by 1 July 2014, and two years earlier for eligible small businesses.

• Generous depreciation rules will apply to small businesses from 1 July 2012.

• A 40% Resource Super Profit Tax will be introduced from 1 July 2012.
  

Now that you have an idea of how the current Federal Budget might affect your family, you can adjust yours to get the most benefit from the current changes. And the next time you feel grouchy about doing your household budget, just be grateful that you’re not the one who has to create a budget for the whole country!

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Author's Biography

Wilson Luna is an author, wealth adviser and founder of Your Family Your Money. Your Family Your Money’s goal is to simplify traditionally complex financial strategies, demystify financial jargon and debunk common financial myths, becoming every family’s first stop for financial advice, information and inspiration.