Mid-Year Economic and Fiscal Outlook 2012-13

Released 22 October 2012, the Treasurer’s mid-year forecast projected a small surplus in the face of declining forecast revenues, with a number of revenue and expense adjustments.  A summary of income tax-specific measures is below.

Treasurer’s media release: MYEFO 2012-13

Full MYEFO document (PDF): Myefo 2012-13

Key tax-related measures:

  • From 1 July 2013 the Government will reduce the Baby Bonus payment for second and subsequent children to $3,000
  • The Government’s contribution to private health insurance will be calculated using commercial premiums as at 1 April 2013 and then indexed annually by the lesser of CPI or the actual increase in commercial premiums. This will be used to determine an individual’s private health insurance rebate. “These changes will reduce the growth of the rebate.” – In other words, overall health insurance will be more expensive. See Health Insurance Tax Offset
  • The Government will remove the Private Health Insurance Rebate on the Lifetime Health Cover loading component of premiums – effectively increasing the overall insurance cost for the over 31s who are liable LHC (see Lifetime Health Cover)
  • Company tax collection arrangements will be reformed to introduce monthly Pay As You Go for large companies.  For an update of progress on this proposal see: Monthly company tax instalments for large companies
  • FBT: In-house fringe benefits provided through salary sacrifice arrangements will no longer be given concessional tax treatment – applies from 22 October 2012 (or from 1 April 2014 for pre-existing salary sacrifice arrangements). There’s a summary here.
  • For the first time, the Government will pay interest at the rate of CPI inflation on all unclaimed superannuation monies reclaimed from the ATO and unclaimed monies reclaimed from the Australian Securities and Investments Commission from 1 July 2013, which will preserve their value over time.
  • As a cost recovery measure 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.
  • GST — reforms to the GST margin scheme: The Government will not proceed with the proposed restructure of the margin scheme provisions announced in the 2010-11 Budget.

Interestingly, not long after MYEFO release, the Treasurer followed up with an admission that a surplus for the 2012-13 financial year is no longer considered likely. See “Budget surplus unlikely as tax receipts plummet” – ABC News 20 December 2012