The Federal Budget's impact on Farmers

The Federal Budget contained some positive changes to the tax system although most changes had already been previously announced.

The changes will generally help small business including agricultural businesses and will also be beneficial to employees as well.

• The Low income tax offset will increase from $1,350 in 2010 to $1,500 in 2011 so that a taxpayer on an income of $30,000 would effectively pay no tax on the first $16,000 and 15% thereafter.
•  The 30% tax threshold shall increase from $35000 to $37,000 and the 38% marginal tax rate (applicable to that part of taxable income between $80,001 to $180,000) will reduce to 37%. A taxpayer earning $150,000 in 2010 pays $44,450 in tax whereas in 2011 the taxpayer would pay $43,450 making the taxpayer $1,000 better off.
• Lowering tax by 50% on the first $1,000 in interest earnings will be more beneficial for high income earners. Many pensioners are already non taxable and this concession will not benefit them. There appears to be no equivalent concession for the deeming provisions on Centrelink pension entitlements.
• The tax free threshold for many Senior Australians shall increase from $29,867 to $30,685 for singles and from $25,680 to $26,680 for each member of a couple. That is a qualifying senior couple could jointly earn $53,360 without paying any tax.
• Standard deductions for wage earners of $500 commencing in 2013 and $1,000 in 2014 will provide a real tax benefit to many wage earners and simplify their tax returns. Many mine workers for instance who have very few deductions will save tax of $385 on $1,000 claimed in 2013 if their tax rate is 37%(plus 1.5% Medicare).
• The Company tax rate for businesses with less than $2,000,000 will reduce from 30% to 28% from 1st July 2012.  Companies with turnovers above $2,000,000 will have their company tax rate reduced from 30% to 29% in 2014 and to 28% in 2015.
• From 1^st July 2012 small businesses with turnovers below $2,000,000 will be able to write off assets valued under $5,000. Currently, the write off limit is $1,000. The increase in limit from $1,000 to $5,000 is likely to create some good tax breaks for many smaller farmers and businesses. A computer system costing $4,000 will provide an up front tax benefit of $1,200 based on a 30% tax rate. Under the previous rules, the up front tax benefit would be only $180.
• From 1^st July 2012, people over 50 will be able to continue to make tax deductible superannuation contributions of up to $50,000, provided they have superannuation benefits of under $500,000. This increases the tax deductible limit from $25,000 to $50,000 . The extra tax savings at a tax rate of 30% is $7,500 although the contribution will attract tax at 15% or $3,750 in the superannuation fund.
• The Superannuation Guarantee Rate will increase from 9% to 12% in a staged increase from 1^st July 2013. This will cost employers but benefit employees.
• Low income earners will receive a $500 super bonus paid into their superannuation fund where their incomes are below $37,000 contribute to superannuation. This change is designed to ensure low income earners actually receive a tax benefit from contributing to superannuation.
• The 40% Resource Super Tax  on mining profits targets big mining companies for significant extra taxation revenue…but many smaller businesses working for mining companies could be adversely affected if the result of the tax is a downturn in mining activity and in mining  investment and development.