Henry Review Summary

The Australian Government has released its response to the Henry Tax Review. The Report has 138 recommendations, which will only be implemented if and when the Government decides to do so over the next 10 years. Only a few recommendations have initially been adopted by the Government.

What these changes could mean to you

Superannuation
The superannuation guarantee charge (SGC) will be increased by annual increments until it reaches the plateau level of 12% by 2019/20.

Currently 9%, the SCG increase is to commence from 1 July 2013 when the rate will be 9.25%.

The SGC age limit will also increased from the age of 70 to the age of 75 with effect from 1 July 2013.

The $50,000 concessional cap remains for individuals aged 50 and over with total superannuation balances below $500,000. This extends the $50,000 cap that was due to expire on 30 June 2012 and doubles the cap of $25,000 which is scheduled to apply from 1 July 2012.

A new government superannuation contribution of $500 will be provided for workers with adjusted taxable incomes of up to $37,000.

What these changes could mean to your business

Company tax rate
The company tax rate will be reduced. Currently the company tax rate is 30% for all companies regardless of size. The proposal is to reduce the tax rate for all companies to 29% from the 2013/14 financial year and to 28% from the 2014/15 financial year.

The tax rate for eligible small business companies will be reduced to 28% from 1 July 2012.

Small business write-off
From 1 July 2012 the immediate write-off for assets of small businesses will be extended to assets valued at less than $5,000. Currently the immediate write-off is limited to capital purchases of less than $1,000.

This means business will be able to immediately write-off the cost of assets rather than depreciating the asset over a number of tax years.

A second proposed change to the small business assets write-off will allow assets valued at $5,000 and over (apart from real estate) to be pooled together and depreciated at a rate of 30% per annum.

Resource Super Profits Tax (RSPT)
From 1 July 2012 the Government proposes to introduce a RSPT at the rate of 40% on profits from exploitation of non-renewable resources. The RSPT will apply to all legal entities such as companies, trusts and partnerships.

Recommendations that will not proceed

Some of the recommendations which the Government has announced it will not implement include:

• Land tax on the family home;
• Including the family home in means tests;
• Require parents to work when their youngest child turns four;
• Reduce the capital gains tax discount;
• Apply a discount to negative gearing deductions;
• Change capital gains tax grandfathering arrangements;
• Remove the Medicare Levy;
• Introduce a bequests tax;
• Abolish the luxury car tax;
• Remove the benefits of dividend imputation;
• Reduce indexation of the age pension;
• Reduce pensioner and low income concessions for utilities, transport and other essential services; and
• Change alcohol tax

For more information please contact your Baker Affleck accountant or tax consultant on (07) 5538 3088 or click here and we will contact you