The new Federal Budget was announced on the 10th May.
Whilst we were promised a tough budget, we were presented with a raft of small changes across numerous areas.
As tax agents and indeed tax payers, we noted the significant number of tax changes.
Not surprising considering that expected tax receipts were revised down by $16bn over the first two budget years, and that we now sit with a forecast cash deficit of $22.6bn for 2011-12.
Today we look at a few of the changes to income tax and fringe benefits tax.
Whilst there are no changes to personal tax rates, we have the flood levy coming in from 1 July, 2011.
The flood levy of 0.5% will apply to all taxpayers on the part of taxable income above $50,000 and a 1% levy applies to the part of taxable income above $100,000.
Although this is a relatively ‘minor’ change for some it may be worth actually bringing some income forward as part of your year end tax planning strategy.
There are also some changes to the scaling in of the low income offset. Those in business should be mindful of these changes as they will mean upgrading payroll software or implementing new ‘tax tables’.
From 1st July, minors will no longer be entitled to the low income tax offset on unearned income. This of course discourages ‘income-splitting’ and will lower the amount we can effectively distribute to children from the family trust.
In addition the tax offset for dependent spouses aged less than 40 will be removed.
For those with self managed superannuation funds the ATO levy will increase by 20% to $180 from 1/7/2012.
For those in business, there will be an immediate write-off of all assets valued under $5000 and an instant write-off of the first $5000 of any motor vehicle purchased - but this will not take effect until 2012-13.
Very nice...but a lot of businesses will find it difficult to purchase new assets and thus won’t benefit from this deduction.
The current statutory formula for valuing motor vehicle Fringe Benefits uses a schedule of four different rates. 
A flat 20% rate is to be phased in over a four year period and will apply regardless of the kilometres travelled.
This will a greater benefits to employees who are provided with work vehicles and who travel under 15,000km per year, as their rate drops from 26% to 20%.
The main impact to most families will come via changes to Family Tax Benefits with those with older children set to benefit from increases.
There are no changes to the income test for the private health insurance rebate at this stage although this is still before the Senate.
In our next issue we will look at how you can create your own personal budget.
This newsletter is presented in summary form as a guide only for our clients. It should not be relied on as a substitute for detailed advice or solely as the basis for making business decisions.