What does the Federal Budget mean for you?

Here is what City businesses and residents can expect to get from last week’s Federal Budget.

Wayne Swan delivered a fairly tame, yet solid budget. The $40.8 billion deficit is actually $16.3 billion less than expected, with the Treasurer also predicting a return to surplus three years earlier.

Only a handful of goodies were expected after last year’s stimulus handouts. But what would an election year be without a few incentives?

Tax cuts

Most taxpayers can expect a $300 tax saving from 1 July as the 30% marginal tax rate threshold increases from $35,000 to $37,000. There is an additional windfall of up to $1,000 for those earning more than $80,000 as the 38% marginal tax rate decreases to 37%.

First Home Savers

First Home Saver Accounts holders will no longer have to wait four years before they are able to buy a home due to a slight relaxation of the rules.

e-health

From 2012, patients will be able to check and control their health records online under e-health. Every Australian will receive a 16 digit electronic health number and can opt-in to including information such as medications, allergies, test results and immunisations.

Apprenticeship incentives

Small and medium businesses who take on and retain apprentices in traditional trades between now and November 12 will be eligible for payments of up to $4,850.

Lower company tax

The company tax rate will reduce by 2% to 28% by 2014 with small incorporated businesses getting access to the cut a year earlier. Small business also wins with an immediate write-off for assets up to $5,000 from 1 July 2012.

Targeting the cash economy

The Tax Office is getting $107.9m over the next four years to address small business operators who use cash transactions to avoid tax.

Net medical expenses threshold

The threshold that taxpayers can claim 20% of net medical expenses has risen from $1,500 to $2,000, and will be adjusted for CPI each year.

Child care rebate reduction

The Government has announced that it will cap the annual Child Care Rebate for the next four years to the 2008-09 level of $7,500 per child from the current annual cap of $7,778 per child.

A BIG THUMBS UP FOR …

… the 50% tax discount on up to $1,000 of interest income from 1 July 2011. Saving will be more attractive and we can expect downward pressure on banks’ funding costs – resulting in more competitive loan rates for home owners.

BUT A BIG THUMBS DOWN TO …

… the $500 standard deduction for work related expenses from 2012/13. An unofficial “$300 without receipts” system has been operating for umpteen years and a CPI upgrade has been long overdue. But keep your receipts for the next three tax returns because this change does not come into effect until 2012/13.

By Adrian Raftery