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The money to be raised by the carbon tax was earmarked by the
Government for a variety of uses including changes to the personal
income tax which will come into effect from 1 July 2012:
the tax free threshold for individuals will be increased from
$6,000 to $18,200;
the low income tax offset will be reduced;
the thresholds for the Medicare levy will be increased;
and
the two bottom tax brackets [currently 15% and 30%] will be
increased to 19% and 32.5%. The thresholds for these rates and the
remaining rates are unaffected.
Withdrawn measures
However, the Government announced in the Budget a decision to
withdraw some concessions previously announced.
The Government is not proceeding with the 2010-11 Budget measure
to provide individuals with a 50% tax discount for interest income,
which was due to commence on 1 July 2013. The Government decided
not to proceed with this measure due to concern from industry and
stakeholders regarding the complexity involved in calculating the
discount and its overall effectiveness.
Similarly, the Government is not proceeding with the 2010-11
Budget measure to introduce a standard deduction for individuals as
an alternative to itemising tax deductions for work-related
expenses and costs of managing tax affairs, which was due to
commence on 1 July 2013. The Government says that it is pursuing
other simplification measures.
Living-away-from-home allowances and housing fringe
benefits
In releasing the 2011-12 Mid-Year Economic and Fiscal Outlook on
29 November 2011, the Treasurer announced that the Government
intended to amend the Living Away from Home
("LAFH") allowance and housing fringe
benefit rules with effect from 1 July 2012.
In essence, these changes proposed that:
employees receiving a LAFH allowance would be required to
substantiate their actual expenditure on accommodation and food
above a statutory amount;
temporary residents would be required to maintain a home for
their own use in Australia and to be living away from that home for
work, in order to access concessional tax treatment; and
the taxation treatment of LAFH allowances would be administered
under the income tax system rather than under the fringe benefits
tax legislation – that is, the LAFH allowance would be
treated as assessable income to the employee with deductions only
being allowed for substantiated accommodation and food
expenses.
In the Budget, the Government proposes to limit further the
availability of tax concessions for LAFH allowances and housing
fringe benefits. This is to be done by –
requiring all recipients to maintain a home in Australia and to
be living away from that home for work, in order to access
concessional tax treatment (ie, this requirement will now apply to
residents as well as temporary residents); and
imposing a one year time limit on the period that concessional
tax treatment can be claimed (apart from fly-in fly-out
arrangements).
These changes are not to affect the tax treatment of travel and
meal allowances provided to employees who have to travel from their
usual place of work for short periods (generally up to 21
days).
The Budget changes are to apply from 1 July 2012 for
arrangements entered into after 8 May 2012, and from 1 July 2014
for existing arrangements.
There is to be consultation before releasing the legislation
that is to enact these changes.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
Greenwoods & Freehills are the winners of the 2011 BRW
Client Choice Awards.
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