Federal Budgets have many parts but the one that gathers the most attention is called tax. Jason Spits looks at the tax changes which will affect clients of planners.
In keeping with this Budget’s theme of increased benefits for older Australians the Government have increased the tax rebates for retirees and back dated this move to July 1 last year.
This has also been applied to on a low income aged pension and those eligible will receive a refund as a result of the backdated changes when they lodge a tax return for this year.
In effect this move has raised the maxium rebate to more than $2200 for individuals and slightly more than $1600 for each member of a couple. This rebate will be received when the taxable income is below $20,000 for an individual and below $32,600 for a couple. However individual seniors with incomes below will not need to lodge a tax return.
According to Sealcorp associate director Tim Gunning this means that an individual with an income sourced only from an allocated pension may receive income of up to $30,350 without paying any tax.
This works out at over 50 per cent more tax free income than for a retiree without an allocated pension. When applied to a couple the combined tax free amount equals $52,7000 and is 62 per cent higher then the same couple without the allocated pension.
The Government’s other tax measure, the one off $300 payment, is not so generous and will not have advisers scrambling to contact clients to provide advice. However if clients are in for a review advisers can assist in giving advice as to how to claim the payment.
The payment will only be made to pensioners and certain self funded retirees over the age pension age and has promised to do so by June 30 this year.
Self funded retirees will have to meet other criteria and will need to make any claims through centrelink by the end of December this year.
Not all tax changes relate to retirees and pensioners however with the Budget confirming the Government’s decision to withdrew the entity tax draft provisions. This decision had been made earlier and the Government has stated it will begin consultations before introducing new rules in this area.
This means that discretionary and family trusts will not be taxed at company rates nor will they have the dividend imputation regime applied to them thus saving many planners and clients some difficult rearranging of established investments.
At the same time the Government has made no indication that it would be changing the capital gains tax (CGT) rules regarding the taxation of assets transferred from the accumulation to pension phase in superannuation and life insurance.
In fact no comments were made in the Budget papers and no date was set. This contrasts with the CGT relief granted to shareholders of listed investment vehicles.
From July 1 this year, some shareholders in listed investment companies (LIC) would receive a CGT discount of 50 per cent. These LICs need to operate in the same manner as managed funds to be eligible, and will be treated in the same way as a managed fund when distributions result from a capital gain.
