Budget 2011 - For the individual

Tax rates to be maintained

In keeping with the previously announced tax rates, the personal income tax thresholds for the 2011-2012 year will remain the same. However, from 1 July 2011 there will be the introduction of the Flood Levy which is reflected in the following table:

Taxable income ($)	Rate (%)
0 - 6,000	0
6,001 - 37,000	15
37,001 - 50,000	30
50,001 - 80,000	30.5
80,001 - 100,000	37.5
100,001 - 180,000	38
180,001 +	46

Note: The above rates above exclude Medicare levy.

Minor Tax-Free threshold has been reduced from $3,333 to $416

Effective date: 1 July 2011

Children under the age of 18 will no longer be able to access the low income tax offset (LITO) to reduce tax payable on unearned income such as dividends, interest and rent. This won’t impact income earned by children from work, unearned income of orphaned or disabled children and compensation payments and inheritances received by children.

Removing the low income tax offset for minors will significantly reduce the attractiveness of investing on behalf of minors or making trust distributions to them. This is because currently it is possible for a minor to receive a maximum tax-free income of $3,333 each year when the low income tax offset is taken into account.

However from 1 July 2011, unearned income will be taxed as follows:

Unearned income ($)	Tax payable
$0 – $416 Nil
$417 – $1,307	66% of excess over $416
$1,308 +	45% of entire unearned income

Changes to receiving the benefit of low income tax offset

Effective date: 1 July 2011

Lower income earners will receive more of the low income tax offset during the financial year, rather than being compensated after their tax return is lodged.  There is no net tax effect of this change.  It simply enables lower income earners to receive more in their pay packet during the year rather than having to wait for their tax refund at the end of the year.

Dependant spouse tax offset removed for some

Effective date: 1 July 2011

The dependant spouse tax offset will no longer be available for spouses born after 30 June 1971.  The dependant spouse tax offset was received by childless couples where one of the partners received very little or no income.

Certain exceptions will apply including where the spouse is an invalid or permanently disabled.  The maximum offset is currently $2,243 per year.

No deductions against Government assistance payments

Effective date: 1 July 2011
The Government will amend the tax law to prevent self-education and other deductions from being claimed against all Government assistance payments.  This is in response to the 2010 High Court decision in FCT v Anstis which permitted such claims. The High Court decision enabled those receiving Youth Allowance to claim tax deductions for school costs as they directly related to obtaining the Youth Allowance.

The Government says the change is designed to maintain the integrity of the tax system.

Income test on the private health insurance rebate

Although not formally announced in the Budget, Treasury has confirmed that the Government intends to re-introduce a package of bills to income test the 30% private health insurance rebate. The measures will be essentially the same as the bills that were defeated twice in the Senate in February and March 2010. 

The defeated bills had also proposed to increase the rate of Medicare levy surcharge that certain taxpayers would be liable for when they have income for surcharge purposes above specified thresholds and do not have complying health insurance:

Singles earning between $90,001 and $120,000 and couples/families earning between $180,001 and $240,000 would have been liable for a 1.25% Medicare levy surcharge.
Singles earning above $120,000 and couples/families earning above $240,000 would have been liable for a 1.5% Medicare levy surcharge.

Social security/Centrelink

Paid Paternity Leave scheme delayed

Effective date: 1 January 2013

The implementation of Paid Paternity Leave will now take effect from 1 January 2013, a delay of six months. The measure will provide eligible working fathers and other partners who are providing full-time care or sharing the child's care, with two weeks paternity leave paid at a rate equivalent to the national minimum wage where children are born on or after 1 January 2013.

Family Tax Benefit and Baby Bonus

Increase in Family Tax Benefit (FTB) Part A for 16-19 year olds
From 1 January 2012, the new maximum rate of FTB Part A for 16-17 year olds in secondary school will be increased from the current $52.64 per fortnight to $214.06 per fortnight, an increase of around $4,200 per year.

For 18-19 year olds in school, the increase will be $3,741 per year. This will align with the 13-15 year old rate and ensure assistance for families does not drop when children turn 16.

The increases to FTB Part A will only be available for families where their teenager is in full-time secondary study or the vocational equivalent.

Lowering of the maximum eligibility age
From 1 January 2012 the maximum age of eligibility for FTB Part A will be lowered from 24 to 21.

Advance payments
From 1 July 2011, families will be able to receive an advance of a maximum of 7.5% of their total rate of FTB Part A payment, up to $1,000. For example, a family with two children under 12 will be able to receive an advance payment of up to $644.

The purpose of this measure is to enable families to receive lump sums in hard times during the year.  Subsequent family assistance payments will be reduced.

Stopping indexation of thresholds
The Government also said it would extend indexation pauses on higher income limits for a further two years until 30 June 2014 in the following areas:

	The FTB part B primary earner income limit will remain at $150,000
	The income limit for receiving dependency tax offsets will remain at $150,000
	The Baby Bonus eligibility limit will remain at $75,000 family income in the six months following the birth or adoption of a child
	The Paid Parental Leave income limit will stay at $150,000 for the primary carer in the previous financial year before the birth of the child
	The higher income-free area of FTB Part A will remain constant.

The annual end of year FTB supplements will be held at the current levels for the next three years.  FTB supplements were payments that families received once both parents had lodged their income tax returns. The FTB supplements will be fixed at the current 2010/11 levels of $726.35 per annum per child for FTB Part A and $354.05 per annum for FTB Part B until 1 July 2014.

Usually these types of thresholds are indexed each year.  These measures will result in savings of $1,202 million over four years.

Fortnightly payment rates for Family Tax Benefit and the Baby Bonus will continue to be indexed every year.

HECS: reduction in discounts

The following discounts applying to payments made under the Higher Education Contribution Scheme (HECS) will be reduced:

	the discount available to students electing to pay their student contribution up-front will be reduced from 20% to 10%
	the bonus on voluntary payments to the Tax Office of $500 or more will be reduced from 10% to 5%.

Under HECS, students electing to pay their student contribution up-front will continue to receive a 10% discount on the payment. Students choosing not to pay up-front can take out a concessional loan to pay their student contribution under the Higher Education Loan Program (HELP).  This system is handled by the ATO via the student’s income tax return.

Under HELP, students accrue an outstanding debt which is repaid gradually when their assessable income exceeds a minimum repayment threshold. Students can also elect to make additional voluntary payments through the ATO to further reduce their outstanding HELP debt. Payments of $500 or more will now only attract a 5% bonus.  This reduces the incentive to voluntary pay HELP debts up-front. 

Published : 11 May 2011