Federal Budget - Economic Summary

  • Budget deficit estimated to be $49.4 billion for the 2010/11 financial year, decreasing to $22.6 billion for the 2011/2012 financial year.
  • Budget surplus expected in the 2012/2013 financial year.
  • Economy is forecast to grow by 4% in the 2011/2012 financial year and 3.75% in the 2012/2013 financial year.
  • Unemployment is expected to fall to 4.5% by mid-2013.

Federal Budget - Superannuation

  • Effective, 1 July 2011 the Government will provide eligible individuals who breach the concessional contributions cap by up to $10,000, with a one-off option to request that these excess contributions be refunded to them.
  • The minimum annual payment amounts for pensions will be reduced by 25% for the 2011/2012 financial year and will return to normal for the 2012/2013 financial year. For the 2008/2009, 2009/2010 and 2010/2011 financial years the minimum payment amounts were reduced by 50%.
  • The SMSF levy will increase from $150 to $180, effective 1 July 2010.
  • The concessional contributions cap for eligible individuals aged 50 and over and who have less than $500,000 in superannuation, will remain at $50,000 per year. Eligible individuals aged less than 50 will have a cap of $25,000 per year.
  • The Government will ensure that employees receive information on their payslips about the amount of superannuation actually paid into their account. Employees and employers will also receive quarterly notification from their superannuation fund if regular payments cease. This will apply from 1 July 2012.

Federal Budget - Income Tax

No changes to personal tax rates, but don’t forget the flood levy starts from 1 July 2011!
Current tax rates are:

Taxable income (s)

Tax payable ($)

0 – 6,000

Nil

6,001 – 37,000

Nil + 15% of excess over 6,000

37,001 – 80,000

4,650 + 30% of excess over 37,000

80,001 – 180,000

17,550 + 37% of excess over 80,000

180,001 +

54,550 + 45%of excess over 180,000

Note" The above rates exclude the 1.5% Medicre Levy and the flood levy

  • From 1 July 2011, children under 18 years of age (i.e. minors) will no longer be able to receive tax-free distributions from trusts. Prior to this announcement, a minor could receive up to $3,333 each year from a trust controlled by their parents, uncles, aunties, grandparents, etc., tax-free.
  • From 1 July 2011, taxpayers will not be able to claim deductions against any government assistance payments. This is in response to the Anstis case where the High Court ruled in favour of a student wishing to claim deductions against her government income.
  • Taxpayers with a dependent spouse aged less than 40 years will no longer be eligible for the dependent spouse tax offset from 1 July 2011.
  • The Government will try again to introduce an income test for the 30% private health insurance rebate.
  • From 1 July 2011, the proportion of the low income tax offset that is available to workers through their week-to-week pay packets will increase from 50% to 70%. This means that workers will be taxed less during the year, but receive a smaller year-end tax refund. 
  • Small businesses will be eligible for an instant tax write-off of the first $5,000 of any vehicle purchased from 1 July 2012. This write-off is in addition to any depreciation claim.
  • The Entrepreneurs Tax Offset will be abolished from 1 July 2012.
  • The current statutory formula 4-percentage rate scale method for valuing car fringe benefits will be replaced with a single statutory rate of 20%.

Are You Charging Enough?

Calculating the best price to charge for your product or service is perhaps one of the biggest issues you face as a small business owner.  If you price too low, you will be out of business before you know it. If you price too high, you are out of the market. Get your pricing just right, and you will maximise your profits.

Underpricing in small business is common.  Particularly service businesses that have low overheads.  The logic goes that if I can afford to charge less, I should.

The key point to remember is to know what you are really selling.  Is it your product or service? Or is it something else like convenience, speed, reliability?

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