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Federal Budget 2013

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On Tuesday 14th May the Federal Treasurer Wayne Swan handed down the 2013 budget. As has become customary, most of the bad news had already been strategically leaked in the days and weeks leading up to budget night, however the real surprise was that there were no traditional election year sweeteners. Whether the budget is legislated before the end of the winter session of parliament is also something to watch. If it doesn’t, when parliament resumes there will be very little time to get anything done before the writs are issued and the government goes into caretaker mode during the election campaign. However, here is a snapshot of the announcements:

The big end of town: there are a number of changes including to multinational profit shifting measures and improvements to the anti avoidance measures with respect to dividend washing for sophisticated investors- if you are interested, drop me an email and I can send you some more information.

Superannuation: these changes were already announced in April and there have been no additional changes announced – the concessional cap is to increase from $25k to $35k for over 60s from 1 July 2013 and for over 50s from 1 July 2014; tax free pension earnings to be capped at $100k per member – if your super earns an average return of 5% then you would have to have $2m in your member balance (pension account) in order to start to exceed this threshold, so if your account earns $200,000 (let’s assume you have more than $2m or get a better return than 5%) you will only pay 15% tax on the second $100k, so your effective tax rate is only 7.5%. That’s still better than marginal rates outside of super; $300,000 high income threshhold – if you exceed this level of income you will pay an additional 15% contributions tax – still, moving funds from a 46.5% tax rate to a 30% tax rate is a saving of 16.5%.

Small business:while there has been no change to the small business concessions announced this year, last year a generous immediate deduction for new asset purchases under $6,500 and motor vehicles (immediate write off of $5,000) was introduced. This may be an area where a new or returned government under budgetary pressure may look to make savings, so it may be prudent tax planning to bring forward asset purchases or motor vehicle upgrades before a new budget is handed down this time next year.

If you would like more detailed information on the budget, drop me an email at matt@secondnatureaccounting.com.au.