Henry Review Overview
By Cameron Fogarty
On Sunday, 2 May 2010, the Australian Government released the final report of the long awaited Australia's Future Tax System Review (known as the Henry Review) and the Government's initial response to the review.The centerpiece of the Henry Review, amongst the 138 recommendations, is a new resource super profits tax ("RSPT"). The Government has also accepted a number of recommendations relating to company and small business taxes and superannuation.
It is important to note that the introduction of these latter changes is contingent on the implementation of the RSPT. The government has indicated that this is intended to be the first step in a 10 year tax reform agenda.
Recommendation highlights
The following is a summary of the highlights of the Government's response:
♣ A Resource Super Profits Tax (“RSPT”) will be introduced on 1 July 2012 at a rate of 40%on "super" profits made from the exploitation of Australia's non-renewable resources.
♣ The States and Territories will be provided with new, ongoing infrastructure funding, with an initial total amount of $700m in 2012/13.
♣ A refundable resource exploration rebate will be provided to companies, set at the prevailing company tax rate, for exploration expenditure carried out in Australia from 2011/12.
♣ The company tax rate will be reduced to 29% from 2013/14, and to 28% from 2014/15.
♣ The company tax rate for "eligible small business companies" will be reduced to 28% from 2012/13
♣ The immediate write-off for assets of small businesses will be extended to assets valued at less than $5,000 from 1 July 2012.
♣ The superannuation guarantee charge (SGC) will be increased by annual increments until it reaches the plateau level of 12% by 2019/20
♣ The entitlement to the SGC will be broadened by lifting the maximum age threshold from 70 to 75 years of age
♣ The concessional contributions cap will be raised to $50,000 per year for workers who are 50 and over and who have superannuation balances of under $500,000
♣ A new government superannuation contribution will be created which will pay up to $500 for workers with adjusted taxable incomes of up to $37,000
It is important to remember that the above are “recommendations” only and the proposed timeframe for implementation is over the next ten years.
With that in mind, we have provided some further detail in relation to one item which may be of most interest for small business operators.
Small business write-off changes
It is proposed the capital allowances provisions will be changed in order to allow small businesses:
♣ to write off immediately assets valued at under $5,000 (compared with the current $1,000 limit) and
♣ to write off other assets (ie assets valued at over $5,000) in one depreciating pool at the rate of 30%.
Currently, depreciating assets may be allocated to 2 different depreciating pools. This will not apply to buildings. The revised rules will apply from 1 July 2012.
The government will consult on the details of the new rules during the 2010/11 year.
Email your knp representative, knp@knp.com.au or call to make an appointment on +61 3 9824 8111.