Budget 2012

Last night's budget delivered few surprises except for the scrapping of the previously announced reduction in the company tax rate.  Our analysis will hopefully give you a good understanding of the measures that are going to impact on you.  But first let us look at the big picture.

Many are questioning whether a budget surplus is the "holy grail" that we should be searching for.  Yes it delivers on a promise but at what cost?  There is little to stimulate economic activity in this budget and the projected surplus is wafer thin.  The surplus has been achieved by shifting something in the order of $4b of expenditure into 2011-12 (e.g. the Schoolkids bonus that will be paid next month) and if economic conditions are softer than forecast then the surplus may not materialise.  The projected surplus does though reflect a remarkable turnaround from the $44.4b deficit that is projected for 2011-12.

Growth is forecast to be 3.25% with unemployment rising marginally to 5.5% in 2013 and inflation is expected to remain well within the RBA's 2-3% target band.  So now that the Government has announced its fiscal measures, attention now turns to the other element of economic influences: monetary policy.  So the focus will now shift to the RBA to cut interest rates to provide the stimulus to business, households with mortgages and consumer confidence that will boost the economy.

Overall, the budget shows fiscal responsibility, delivers some relief for those on low income (although it penalises some low income earners) and confirms the commencement of the National Disability Insurance Scheme from 1 July 2013.  Small business benefits from enhanced immediate write-off of new assets (previously announced) and the ability to claw back tax paid (although this is only available to approximately 120,000 small businesses operating as companies) but companies miss out on the reduction in the company tax rate previously announced.  The $50,000 deductible contribution to superannuation for over 50s with <$500,000 in super is deferred a further 2 years and high income earners (income over $300,000) will pay 15% more on their superannuation contributions. The restructured tax scales will provide tax savings (to fund the impact of the carbon tax) to low income but these provide no relief to people earning more than $80,000.

For the individual

The following changes will apply to individual taxpayers: 

	Tax cuts for individuals earning less than $80,000
	Schookids Bonus Payment to replace the Education Tax Refund
	Changes to the Family Tax Benefit system
	Standard work related deductions and 50% discount on interest scrapped
	Mature Age Worker Offset to be phased out
	Aged Care changes
	Means testing of the Medical Expenses Tax Offsets
	Social Security changes
	No CGT discount for non-residents
	New tax rates for non-residents

Read more of the changes for the individual

For business 

The main changes affecting businesses are:

	Company tax cut scrapped
	Refunds for company tax loss "carry back"
	Accelerated asset write offs for small business
	Additional support for small business
	Increased ATO compliance funding
	Reduction of fuel tax credits
	Living Away From Home Allowance changes

Superannuation

Changes affecting superannuation announced in this budget included:

	Deferral of higher concessional contributions cap
	Increase in contributions tax for high income earners
	Drawdown relief for super pensions extended

Not for profit sector

The Government announced a major wave of reforms in the 2011 Budget and these reforms continue unaffected by the 2012 Budget.  New changes affecting NFPs in the 2012 Budget include:

	Establishment of the National Disability Insurance Scheme
	Deferral of increases in Foreign Aid

Read more about the NFP changes 

 Published : 9 May 2011