| BUDGET 2003 |
| May Budget |
PERSONAL INCOME TAX CUTS
From 1 July 2003, personal income tax rates will be amended as follows:
Current New Rate
$ $ %
0-6,000 0-6,000 0
6,001-20,000 6,001-21,600 17
20,001-50,000 21,601-52,000 30
50,001-60,000 52,001-62,500 42
60,001+ 62,501 + 47
Increase of low income tax offset from $150 to $235;
Medicare levy low income thresholds will increase to $15,062 for individuals ($25,417 for families) plus $2,334 for each dependent child or student (from 1 July 2002).
CONSOLIDATION HEAD COMPANY - Corporate Unit Trusts And Public Trusts
From 1 July 2002, the Federal Government will allow certain corporate unit trusts and public trading trusts to head consolidated groups, provided they are taxed like companies wherever possible.
Once a trust chooses to head a consolidated group, it will continue to be taxed like a company even if the group subsequently de-consolidates.
INTERNATIONAL TAX MEASURES - Reduced Compliance Burden
Aimed at improving competitiveness and reducing compliance costs, proposed international tax amendments to be phased in from 1 July 2004 include:
Largely eliminating controlled foreign company (CFC) attribution for income earned in the 7 countries with comparable tax regimes to Australia;
Exempting complying super-annuation funds from the foreign investment funds (FIF) regime;
Excluding from attribution certain services income earned by CFCs from overseas associates;
CGT exemptions for disposal of non-portfolio interests in foreign companies with an underlying active businesses;
Extending exemptions for non-portfolio dividends and branch profits repatriated to Australia; and
Updating Australia's tax treaties.
TRANS-TASMAN IMPUTATION REFORM
As from 1 October 2003, Australian shareholders of New Zealand companies will be able to obtain franking benefits for Australian tax paid by the New Zealand companies.
AMENDMENTS TO DIVIDEND IMPUTATION RULES
As previously reported, the Franking Additional Tax will be removed. Credits available for Franking Deficit Tax will, however, be reduced if 'excessive' over franking occurs; and
With effect from 1 July 2001, non-share dividends will be able to be franked in a similar way to dividends paid to holders of ordinary shares.
No Deduction For Capital Protected Products
As from 16 April 2003, taxpayers will not be able to claim a deduction for the cost of the capital feature embedded in a capital protected product - for example, a limited recourse loan facility used to fund the purchase of listed shares.
ALIENATION OF PSI
Changes to the Treatment of Losses
Proposed changes to the Personal Services Income (PSI) rules will allow taxpayers to claim net PSI losses against other income for that year as from 1 July 2000.
PREVENTING THE DOUBLE TAXATION OF FRINGE BENEFITS
To avoid both the FBT and PSI tax liabilities on payments made to associates, the Federal Government will reduce the FBT element, with effect from 1 July 2000.
ALIGNING FBT DEEMED DEPRECIATION RATE WITH EFFECTIVE LIFE OF CARS
The deemed depreciation rate used under the FBT operating cost method for valuing a car fringe benefit will be 18.75%, consistent with that used for income tax purposes. This measure will apply to cars acquired after 1 July 2002.
OTHER MEASURES ANNOUNCED
Roll-over relief will be available in certain circumstances for:
Worker Entitlement Funds; and
Employee Share Schemes.
SUPERANNUATION REGULATION
Both the Australian Prudential Regulation Authority (APRA) and the Superannuation Complaints Tribunal will receive additional levels of funding. This is in line with the Government??s commitment to improve the regulation, and maintenance, of employee retirement benefits.
SIMPLIFIED TAX SYSTEM
Depreciating asset roll-over relief will be available from 1 July 2001 where there is a change in partnership interests.
INDIRECT TAXES - GST
The Government has honoured its commitment to allow GST input credits to be claimed from 1 July 2003 on Compulsory Third Party insurance. It is also proposed that the Government will enact a new definition of what is a charity for the purposes of the GST legislation.
NO ABN - WITHHOLDING AMENDMENTS
Amendments will be made to ensure that the rules will not apply where an entity is unable to obtain an ABN, such as non-business entities, including non-profit organisations and Governments.
TAXATION OF DISCRETIONARY TRUSTS
As reported previously, the Federal Government has announced that it will introduce new legislation effective from 12 December 2002. The amendments are expected to:
more effectively prevent beneficiaries accessing trust income that has only been taxed at the company tax rate; and
replace current legislation dealing with distributions from trusts.
HECS THRESHOLD INCREASE
The current threshold income at which Higher Education Contribution Scheme (HECS) repayments are required to commence will be increased from $24,365 to $30,000 from 2005. However, HECS will remain indexed to the CPI.
UNIVERSITY FEES & HECS - FULL FLEXIBILITY IN SETTING GIVEN TO UNIVERSITIES
The Treasurer announced that from 2005, universities will have flexibility in setting fees for Commonwealth-supported places. This means they can cut them, or they can increase them to a maximum of 30% above HECS (except for teaching and nursing). Institutions will be allowed to increase their intake of fee-paying students from 25% to 50% of total domestic undergraduate students in a course.
Under the new arrangements proposed from 2005, the new student contribution ranges will be:
Band 3 (law, dentistry, medicine, veterinary science):$0-$8,355;
Band 2 (including accounting, commerce, economics, computing):$0-$7,137;
Band 1 (including humanities, arts, behavioural sciences):$0-$5,010; and
Education, nursing: $3,854.
SECOND WORLD WAR COMPENSATION PAYMENTS - TAX EXEMPTIONS EXTENDED
From 1 July 2001, the income tax and CGT exemptions currently available for some payments received from Second World War compensation funds will be extended to all payments received by Australian residents from those funds.
16th-May-2003 |
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