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Henry Review 2010

The government announced that the following recommendations of the Henry Review would be adopted;

• Resource Super Profits Tax that will tax non-renewable resource projects (at a rate of 40%) on their profits rather than just their production (taxpayers will be eligible for a credit for royalties paid to State and Territory Govern­ments) - this will apply from 1 July 2012;
• Refundable tax offset (the Resource Exploration Rebate) at the company level, set at the prevailing com­pany tax rate, for exploration expenditure in Australia incurred on or after 1 July 2011;
• Reduction in company tax rate to 28% - small businesses will benefit from 2012-13, but it will be phased in for other companies (29% for 2013-14 and 28% from 2014-15);
• Small businesses will be able to immediately write-off assets valued at under $5,000 (currently $1,000) and all other assets (except buildings) will be written off in a single depreciation pool at a rate of 30% - this will apply from 1 July 2012;
• Super contributions cap concession: workers aged 50 and over with super balances below $500,000 will be able to make up to $50,000 in annual, concessional superannuation contributions - to apply from 1 July 2012;
• Superannuation Guarantee age limit will be increased from 70 to 75 from 1 July 2013;
• Superannuation Guarantee rate will rise to 12% by 2019-20 (to be phased in); and
• Government will provide a $500 annual superannuation contribution to individuals with an adjusted taxable income up to $37,000.

The company tax rate will be reduced to 28%. The timing of this will depend on whether an entity qualifies as an “eligible small business company”.

The reduction in company tax rate is to be done in 2 stages, commencing from the 2013-14 income year.

Income Year	Corporate Tax Rate (%)
2012-13	30% (current rate)
2013-14	29%
2014-15	28%

 

Eligible small business companies will move straight to the 28% rate with effect from the 2012-13 income year. The rate for small business companies will start one year before the phase-in for other companies.

There is no indication in the Government papers as to what entities will qualify as eligible small business entities. The papers do indicate that there are approximately 720,000 small business companies that can benefit from this meas­ure.

The Henry Report recommended that the small business entity turnover threshold should be increased from $2m to $5m, with adjustments to the $6m net asset value test. There is no formal response to this recommendation.

The Fact Sheet states that the Government will consult on exposure draft legislation, with “relevant issues” to include instalment and franking arrangements.

The existing capital allowance concessions available for small businesses will be expanded by allowing small businesses to immediately write-off assets valued at under $5,000 ($1,000 under the present law), and allowing small businesses to write-off all other assets (except buildings) in a single depreciation pool at a rate of 30% (currently, small businesses allocate assets to 2 different depreciation pools).

This measure will commence from 1 July 2012.

The superannuation guarantee rate will increase from 9% to 12%, phasing in from 1 July 2013. There will be with increments of 0.25% in the first 2 years and 0.5% thereafter.

Commencing	Super Guarantee Rate
1 July 2013	9% (current rate)
1 July 2014	9.25
1 July 2015	9.5%
1 July 2016	10%
1 July 2017	10.5%
1 July 2018	11
1 July 2019	11.5%
1 July 2020	12%

 

The Superannuation Guarantee age limit will be raised from 70 to 75, with effect from 1 July 2013.

Currently, the SG only applies to people aged to 70. However, employers can make deductible super contributions for employees aged under 75, while self-employed people can make deductible contributions until they turn 75.

The commencement date of 1 July 2013 is designed to coincide with the increase in the SG rate.

Under the Government’s measure, the $50,000 cap will be extended permanently for individuals aged 50 or over with total superannuation balances of less than $500,000.

This means that individuals aged 50 or over with total superannuation balances of less than $500,000 can continue to make up to $50,000 per year in superannuation concessional contributions.

Eligible individuals under the age of 75 will still be able to make non-concessional contributions to superannuation up to $150,000 per year. Those who are under 65 can also bring forward 2 years’ worth of non-concessional contribu­tions, allowing them to contribute up to $450,000 of non-concessional contributions in any 3-year period.

From 1 July 2012, the Government will provide a contribution of up to $500 for workers with incomes up to $37,000. This ensures that no tax will be paid on super guarantee contributions for those with income up to that amount in 2012-13.

The amount payable under this measure will be calculated by applying a 15% matching rate to the concessional con­tributions made by or for individuals on adjusted taxable incomes of up to $37,000, with an annual maximum amount payable of $500 (not indexed). The amount will be paid into the individual’s super fund.

Concessional superannuation contributions made from 1 July 2012 will be eligible, with the first Government contribu­tion paid in 2013-14.