Mid-Year Economic and Fiscal Outlook– What you need to know

Treasurer Swan released the Mid-Year Economic and Fiscal Outlook (MYEFO) on 22 October 2012.  We have highlighted below the most important tax measures relevant to you and your business.

Additional funding to the Australian Taxation Office

The Government will provide an additional $390 million to the Australian Taxation Office (ATO) to continue to improve overall compliance with the tax and superannuation system.

The additional funding has been provided allow the ATO to focus on the following activities:

  • continue strategic compliance initiatives to ensure Australians continue to pay their fair share of tax and that a level playing field is maintained for small business
  • follow-up on long-term outstanding debts
  • follow-up on lodgments for businesses, with two or more years of outstanding lodgments
  • address the escalation in the promotion and participation in tax avoidance and tax evasion schemes in Australia;

Accordingly we expect the ATO to increase the number of audits on small to medium size businesses.

Removal of concessional treatment of in-house fringe benefits

In house fringe benefits arise when employees receive goods or services from their employer or an associate of their employer that are identical or similar to those provided to customers by the employer or an associate of the employer in the ordinary course of business.

Under the existing Fringe Benefits Tax (FBT) concession, the taxable value of in house fringe benefits is 75 per cent of either the lowest price at which an identical benefit is sold to the public or under an arm’s length transaction, depending on the nature of the benefit, reduced by a further $1,000.

This concessional treatment will no longer apply to in-house fringe benefits provided under salary sacrifice arrangements entered into after 22 October 2012 and to all in-house benefits provided under salary sacrifice arrangements from 1 April 2014.

Under these new measures the taxable value of in house fringe benefits provided through a salary sacrifice arrangement will be either the lowest price at which an identical benefit is sold to the public or under an arm’s length transaction, depending on the nature of the benefit.

Monthly PAYG instalments for large companies

Measures will be introduced to require large companies to remit Pay As You Go (PAYG) income tax instalments monthly, rather than quarterly.

This reform will be phased in over three years, with companies moving to monthly PAYG instalments:

  • from 1 January 2014 for companies with a turnover of $1 billion or more (around 350 companies);
  • from 1 January 2015 for companies with a turnover of $100 million or more (around 2,500 companies); and
  • from 1 January 2016 for companies with a turnover of $20 million or more (around 10,500 companies).

Superannuation — reform of SMSF levy arrangements

The Government will increase the SMSF levy from $191 to $259 per annum from 2013 14 onwards.

The Government will bring forward payment of the SMSF levy such that it is levied and collected in the same year of income.

Superannuation — tax certainty for deceased estates

The Government will amend the law to allow the tax exemption for earnings on assets supporting superannuation pensions to continue following the death of a fund member in the pension phase until the deceased member’s benefits have been paid out of the fund.

This change will benefit the beneficiaries of deceased estates by allowing superannuation fund trustees to dispose of pension assets on a tax free basis to fund the payment of death benefits.

If you have questions about these changes or any other issues that arise from the MYEFO please contact your local office.