How ‘bout that Budget!
by Michal Park, 11/05/06

What was the talk around your water cooler yesterday?  I don’t know about you, but I can confirm that the usual Big Brother gossip was put aside in our office yesterday morning, replaced with the latest Budget announcements.  And what a cracker they are!

The biggest news was most certainly the amended income tax thresholds across the board that look to benefit everyone (not just those on higher incomes).  This means that ALL income earners will receive a higher net income – providing more opportunity to invest in gearing plans and other savings strategies.  And whilst I hear groans about the reduction in the attractiveness of negative gearing, it is still a good strategy and on the flipside, comes with the end benefit of reduced capital gains tax.

The other changes likely to have the greatest impact are in the superannuation environment – again, the government has changed the goalposts in this space.  Clearly these changes are designed to increase the incentive for individuals to save through superannuation as well as encouraging longer workplace participation for older Australians.  Changes include:

• The abolition of tax on lump sum and income stream payments from taxed funds for individuals over the age of 60,

• The removal of Reasonable Benefit Limits,

• The abolition of compulsory cashing of accumulated superannuation benefits at age 65,

• New annual deductible superannuation contribution limits of $50,000, regardless of age,

• Personal contributions be the self-employed now fully tax deductible,

Whilst not the abolition of the 15% tax on earnings that we were hoping for, these changes still provide plenty of scope to save some tax, and more importantly, increase wealth.  If implemented, these changes will commence from 1 July 2007.