The Labor Government presented the 2008 Federal Budget, the first of its term, on Tuesday 13 May. The delivery brought no major surprises as it was generally a reiteration of previous announcements and pre-election promises.

Whilst the budget is diverse and complex in its coverings, the most predominant areas that were addressed and received some amount of notable change include taxation, superannuation and family benefits, the most prevalent of which are outlined below.

TAX
Changes to current individual tax threshold income ranges will see a shift across most brackets from the beginning of the 2008-09 financial year. This will be followed by a gradual shift in both range and rates across the middle income brackets overt he coming year as well as an incremental reduced rate for the second highest marginal tax bracket. Details of the expected changes can be seen in the table below in bold.

Other tax changes will see an increase in both the Medicare levy low income threshold and the Medicare levy surcharge threshold as well as a proposed gradual adjustment to increase the low income tax offset and senior Australians tax offset over the next few years to 2010.

In terms of business related taxes, the Government proposes there will be increased access to the small business CGT concessions for both small businesses who own a CGT asset which is used by a related entity, and CGT assets that are used in a partnership business and owned by the partner. The report also addresses amendments relating to CGT and interests in widely held entities. The current law states that any CGT liability be calculated using the market value of the asset as opposed to the proceeds that are actually received. Following the report, the law will see CGT calculated on actual proceeds received from assets.

FBT was also addressed with changes to be implemented in relation to work-related items, ensuring that the FBT exemption is only applied where the items are primarily for work purposes. There will also be changes to FBT law regarding the provision of a jointly held investment to employees and their associate. These rulings have taken effect from 7.30pm 13 May 2008.

Following the release of the budget the Government has elected to undertake comprehensive review of the country’s tax system, not including the GST. According to the report there has not been a complete review of the Australian tax system, including State taxes for at least 50 years.

SUPERANNUATION
There will be an expansion on the definition of ‘income’ and this will affect the determination of eligibility for the super co-contribution scheme. Under the adjustment, certain salary sacrifice contributions as well as some family assistance, child support and financial and retirement savings assistance will be incorporated into the ‘means tested’ government support areas. 

The Government has allocated $16.1 million over three years to fund a Superannuation Clearing House Facility. The facility will facilitate employers who have a range of employee super funds to pay into. The employer can make one direct payment in to the clearing facility which will then distribute to the monies to the various funds. The will be a free service with businesses with less than 20 employees and on a fee per service basis for larger businesses.

FAMILY BENEFITS
There are a number of changes in regards to Family Benefits, with perhaps the most discussed being the Baby Bonus. Whilst the bonus has been increased to $5,000, additional conditions include that it will now be means tested, limiting eligibility to those with an annual taxable income less than $150,000, as well as shifting payment arrangements so that the bonus is received in 13 fortnightly instalments, rather than the current lump sum.

For families who currently receive Family Tax Benefit Part A, or whose children receive Youth Allowance or a similar payment, there will be a 50% Education Tax Refund introduced for eligible education expenses. The refund will be up to $375 per primary schools student and $750 per secondary school student. There has also been adjustments to Family Tax Benefit – Part B whereby only families in which the principal earner’s income is up to and including $150,000 per year will be eligible to receive this benefit.

Additional changes will see the Family Tax Benefit now only be paid and claimed through Centrelink and Medicare, no longer through the tax system, somewhat simplifying claiming arrangements for families.

Another announcement that was included as part this budget was the Government’s commitment to the First Home Savers Account. Whilst it is somewhat modified from its initial proposal document, the accounts will be operational from 1 October this year.