FEDERAL BUDGET 2011/2012
The 'Nip and Tuck' Budget
The 2011/2012 Federal Budget was a ‘nip and tuck’ Budget.
Many of the changes were either because of or justified by the need to improve the workforce participation rate to counter the declining unemployment rate from the current level of 5% to 4.5% by June 2013. Others were simply to fulfil the promise of bringing the budget into surplus.
Some changes were more than cosmetic with a temporary flood and cyclone reconstruction levy set to apply in the 2011/2012 income year to those who earn over $50,000 (adding $1.725bn to Government revenues over 5 years). FBT changes will add an additional $970m over 5 years. And, a few tucks will be made to the tax system with the phasing out of the dependent spouse tax offset and removing the ability for minors to access the low income tax offset on unearned income in order to restrict income splitting.
Some areas of interest to business remained unchanged: the company tax rate reductions announced in the previous Budget remain intact as do some of the small business initiatives. Some extra revenue has been gained by delaying the start of some broader (mostly green) reforms and infrastructure projects, and holding indexation at current levels for family payments.
In the superannuation area, reforms to the excess contributions tax regime may provide some relief (but not this year).
Some of the detail, such as the $5,000 write-off for small business to purchase a car (replacing the entrepreneurs tax offset), and the FBT changes were announced/leaked ahead of the budget. So, there were few surprises in this budget.
The elephant in the room was the carbon emissions trading scheme, or the lack of it. There is no detail beyond funding for an advertising campaign. This means that when the final shape of the emissions trading scheme is known, the Government will need to release an updated set of figures.
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