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2008 Federal Budget overview
Key superannuation-related changes
28 May 2008
The 2008 Federal Budget, announced by the Treasurer on 13 May, contained many measures largely reiterating previous Government announcements (including personal tax cuts).
While there were no substantial superannuation changes, some key announcements include:
- a change to the definition of income, for determining co-contribution eligibility;
- changes to the handling of temporary resident contributions and balances; and
- funding for a clearing house facility.
Superannuation announcements
For individuals
Definition of income for superannuation co-contributions
From 1 July 2009, the definition of income used to determine eligibility for Government co-contributions will be expanded to include salary sacrifice superannuation contributions.
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Temporary resident contributions
Future superannuation contributions and existing balances of temporary residents (excluding New Zealand residents temporarily in Australia) will be paid to the Australian Taxation Office (ATO). While the effective date is being deferred to allow for industry consultation, core parts of the policy announced to date include:
- temporary residents who permanently depart Australia will only be able to claim their superannuation within five years of departure;
- temporary residents who become permanent residents will have their superannuation transferred back to a superannuation fund with interest;
- employers may pay temporary residents' superannuation contributions to a fund or directly to the ATO; and
- it is proposed that there will be annual matching of data by the ATO and the Department of Immigration and Citizenship to identify funds holding balances for temporary residents. The funds will be notified by the ATO and be required to transfer those balances.
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Same-sex couples
Proposed changes to a wide range of laws will provide same-sex and opposite-sex de facto couples with equal treatment. The changes do not alter marriage laws.
Most of the changes are to be legislated by 1 July 2009. However, amendments to the tax treatment of superannuation death benefits to a same-sex partner are expected to come into effect from 1 July 2008.
Currently, unless a same-sex partner meets the stricter definitions of being a financial dependant or an interdependant of a deceased superannuation fund member, they are liable to pay tax on the Taxable component of a lump sum superannuation death benefit. This is in contrast to the tax free status (regardless of age) afforded to married or opposite-sex de facto partners.
For employers
Superannuation Clearing House Facility
Funding will be provided over three years to the ATO to establish a Superannuation Clearing House Facility to help employers meet their fund choice obligations.
The clearing house will be offered free of charge to small businesses with less than 20 employees and on a fee-for-service basis to larger businesses.
This facility, which will be made available from 1 July 2009, will be contracted out to the private sector. The Government has committed to consulting with the industry prior to implementation.
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Other announcements
Australia's Future Tax System
The Government has announced a comprehensive review of the State and Australian tax system. The review will make recommendations with the aim to enhance the overall economic, social and environmental wellbeing of Australians. In the context of this review, the Government has announced it:
- will not raise the rate or broaden the base of the GST;
- will preserve tax-free superannuation payments for those over 60 years of age; and
- is committed to aspirational personal income tax goals.
The review will report progressively from July 2008 to the end of 2009.
Personal income tax aspirational goal
An aspirational goal has been announced to further reduce the personal tax rates over the next six years. This would see the number of tax rates reduce from four to three (i.e. 15 per cent, 30 per cent and 40 per cent). The low income tax offset would also increase to provide an effective tax-free threshold of $20,000 by 2012-2013.
Employee share schemes
Based on perceived integrity issues with employee share schemes, the Government has announced it will introduce measures to ensure that, where an election is made to be taxed on shares up-front, the amount above the $1,000 exemption must be included in the employee's tax return. Additionally, an anomaly that may cause double taxation in certain employee share schemes using employee share trusts is to be removed.
First Home Saver Accounts
The Government has confirmed it will introduce legislation effective 1 October 2008, allowing the establishment of concessionally taxed First Home Saver Accounts (FHSAs). The new account will be available to eligible account holders aged between 18 and 65 years who have never previously bought or built a home in which to live (subject to certain conditions).
FHSAs may be offered by Approved Deposit Taking Institutions which include banks, building societies, credit unions as well as registered trustees of public offer superannuation funds.
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Personal income tax rate and threshold changes
The Government has confirmed previously announced changes to personal income tax rates and thresholds. These changes are highlighted in red below.
Current tax thresholds (2007-08) |
Tax rate* % |
New tax thresholds (2008-09) |
Tax rate* % |
New tax thresholds (2009-10) |
Tax rate* % |
New tax thresholds (2010-11) |
Tax rate* % |
| $0 - $6,000 | 0 | $0 - $6,000 | 0 | $0 - $6,000 | 0 | $0 - $6,000 | 0 |
| $6,001 - $30,000 |
15 | $6,001 - $34,000 |
15 | $6,001 - $35,000 |
15 | $6,001 - $37,000 |
15 |
| $30,001 - $75,000 |
30 | $34,001 - $80,000 |
30 | $35,001 - $80,000 |
30 | $37,001 - $80,000 | 30 |
| $75,001 - $150,000 |
40 | $80,001 - $180,000 |
40 | $80,001 - $180,000 |
38 | $80,001 - $180,000 |
37 |
| $150,001 + | 45 | $180,001 + | 45 | $180,001 + | 45 | $180,001 + | 45 |
* Does not include the Medicare Levy
Tax payable and potential tax savings
The following table shows the amount of tax payable and tax saved in future financial years for a range of taxable incomes, when compared to the current (2007-08) financial year.
Taxable income |
2007-08 Tax Payable# |
2008-09 |
2009-10 |
2010-11 |
|||
Tax payable # |
Tax saved |
Tax payable # |
Tax saved |
Tax payable # |
Tax saved |
||
| $20,000 | $1,350 | $900 | $450 | $750 | $600 | $600 | $750 |
| $40,000 | $6,250 | $5,200 | $1,050 | $4,900 | $1,350 | $4,450 | $1,800 |
| $60,000 | $12,600 | $12,000 | $600 | $11,700 | $900 | $11,250 | $1,350 |
| $80,000 | $19,100 | $18,000 | $1,100 | $17,850 | $1,250 | $17,550 | $1,550 |
| $100,000 | $27,100 | $26,000 | $1,100 | $25,450 | $1,650 | $24,950 | $2,150 |
| $120,000 | $35,100 | $34,000 | $1,100 | $33,050 | $2,050 | $32,350 | $2,750 |
| $140,000 | $43,100 | $42,000 | $1,100 | $40,650 | $2,450 | $39,750 | $3,350 |
| $160,000 | $51,600 | $50,000 | $1,600 | $48,250 | $3,350 | $47,150 | $4,450 |
| $180,000 | $60,600 | $58,000 | $2,600 | $55,850 | $4,750 | $54,550 | $6,050 |
| $200,000 | $69,600 | $67,000 | $2,600 | $64,850 | $4,750 | $63,550 | $6,050 |
# Does not include the Medicare Levy, or tax offsets other than the low income tax offset.
Want to know more?The Federal Government has published budget papers and useful summaries online: www.budget.gov.au |
Disclaimer
The material on this website is of a general nature only and has been prepared without taking into account your objectives, financial circumstances or needs and much of this content will depend on Parliament passing appropriate legislation. Because of this, you should, before acting on any of this information, consider whether it is appropriate to your objectives, financial circumstances and needs and seek professional advice. Please note that the information is current as at 14 May 2008. Any subsequent changes in law or policy have not been incorporated.
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