Archive for the 'Tax Review' Category

2013/14 Federal Budget: Video blog

This week Treasurer Wayne Swan delivered the 2013/14 Federal Budget in Canberra, and as always, here’s our annual post-budget review with Senior Tax Adviser Simon Ellis!

 

Additional Changes

In addition to the changes outlined in the above video it is worth noting that the 0.5% increase in the effective tax rate for all employees – i.e. the increase in the Medicare levy – will actually slightly increase the after-tax savings achieved through salary packaging.  For every $1,000 in benefit costs an employee salary packages (i.e. pays for with pre-tax salary) they will now save an additional $5.

As well as this the budget announced that the FBT rate will increase to 47% from 1 April 2014 and this will mean the FBT-gross up rates also change from that date as follows:

  • Type 1: moves from 2.0647 to 2.0802
  • Type 2: moves from 1.8692 to 1.8868

As a result of these changes employees in the not-for-profit and public hospital sectors will see a small reduction in their threshold (or “cap”) benefit as follows:

  • The annual amount a Public Hospital employee is able to package under this benefit will decrease from $9,095 to $9,010, and
  • The annual amount a PBI employee is able to package under this benefit will decrease from $16,050 to $15,900

The impact of the reduced limit will, however, be largely offset by the increase in salary packaging savings flowing from the higher Medicare rate

Timeframes

Employers and employees should note the following timetable for implementation of the salary packaging changes noted in this post:

Changes applying from 1 July 2013
  • Increase of the superannuation concessional cap to $35,000 p.a. for individuals aged 60 and over
  • Increase in the Superannuation Guarantee rate from 9% to 9.25%
Changes applying from 1 April 2014
  • Transition period for novated lease benefits ends: all salary packaging employees move to the flat 20% statutory rate (i.e. no more km travel)
  • Transition period for in-house fringe benefits ends: no more packaging of this benefit can occur
  • New FBT rate of 47% applies and threshold limits for NFP employers change
Changes applying from 1 July 2014
  • Increase of the superannuation concessional cap to $35,000 p.a. for individuals aged 50 and over
  • Cap of $2,000 will be applied to salary packaging of self-education expenses
  • Increase in the personal medicare levy from 1.5% to 2%.

2012-13 Federal Budget Analysis: Video

Watch our video analysis of the 2012-13 Federal Budget. Simon Ellis, our Senior Tax Specialist, outlines his thoughts on the budget and how they will impact salary packaging.  A written summary can also be found here.

Leave a comment here.

The National Tax Forum and Salary Packaging

Hi Blog Readers – Simon Ellis here guest posting on the recent Tax Forum.

Well the National Tax Forum has wrapped up in Canberra, and Australia’s stockpile of tax policy ideas has now been officially replenished.  Influential thinkers from around Australia – from politicians to tax professionals to ordinary Australians – have had an opportunity to express their views on the direction in which Australia’s tax policy ought to head.

So “what about salary packaging?” I hear you ask.  Are there any serious Forum suggestions with the potential to impact it?  Well I’m glad you asked:

1.  Taxing benefits in employee hands

Parts of the business community have eagerly seized a Henry Review recommendation to move the burden of benefit taxation from employers to employees.   These advocates want to make benefits (especially cars) taxable ‘in your hands, rather than your employers’.

It’s not exactly a ‘winner’ from a political or social perspective and it’s doubtful we’ll hear much more about it in the near future.

 2.  Removing the tax-free ‘cap’ benefit

Once again, commercial hospitals have voiced their longstanding complaint that the tax-free ‘cap’ benefit is unfair to them.  The cap does make it much harder for them to use their extra cash to poach valuable staff from Public Hospitals and Charities, but then that’s exactly what the cap was meant to do so I’m not sure what their point is.

It’s fair to say that if their policy suggestion becomes seriously considered they can expect a hell of a fight from the Charity Sector (and Smartsalary for that matter), just like they got a year ago when the Henry Review considered the same complaint.  The Rudd government had no appetite for the fight back then and it is unlikely that the current government has much appetite for it now.

 3.  Shutting down “loopholes”

One of the more interesting things to come from the Forum has been a general commitment from our Treasurer to close “tax loopholes”, which he seems to believe includes the living-away-from-home allowance.

Aside from the fact that the LAFHA is not actually a loophole, his general sentiment is probably one with which most people would agree and some policy initiative is probably likely in this area.  I don’t think that they’ll find it easy to tamper with LAFHA, since it’s a benefit that many businesses legitimately rely on to move talented staff across their enterprise, but it looks like they’ll give it a go.

That’s about all from a salary packaging perspective.  It was a wide ranging review so we wouldn’t expect to see benefit taxation taking centre stage but, even so, it didn’t seem like there was a groundswell of support for significant benefit reform.  The recent changes to car packaging rules, which made vehicle packaging more attractive for low kilometre employees, seem very likely to remain intact.

The echoes from these sorts of events can continue to bounce around the public debate for a long time to come – in fact the government’s announcement that it will now create a business tax reform working group, a think tank on tax reform plus an independent tax advisory board for the ATO practically guarantees that they will.

We’ll be keeping a close eye on the tax reform agenda going forward and we will, of course, keep you posted.


Deven Billimoria
Chief Executive Officer
Smartgroup

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