Taxation Measures in Government's mini-Budget
On 29 November 2011, the Government released its 2011-12 Mid-Year Economic and Fiscal Outlook.
As part of the Outlook, a number of tax measures have been proposed and some previous measures deferred, including:
Fringe benefits tax (FBT) - Living-away from home allowance (LAFHA)
According to the Government, the LAFHA exemption under the FBT law is being increasingly misused by a narrow group of people, particularly highly-paid executives and foreign workers.
This has seen the total amount of tax-free LAFHA reported by employers to the Tax Office increase from $162 million in 2004-05 to $740 million in 2010-11.
As such, the Government intends to make the following reforms to the LAFHA rules:
- Access to the tax exemption for temporary residents will be limited to those who maintain a residence for their own use in Australia, which they are living away from for work purposes, such as 'fly-in fly-out' workers; and
- Individuals will be required to substantiate their actual expenditure on accommodation and food beyond a statutory amount.
The Government has assured that no permanent resident legitimately using this tax exemption for accommodation and food expenses will lose any entitlements.
In addition, these reforms will not affect other tax concessions, such as those that apply to travel and meal allowances, and remote area fringe benefits.
The reforms will apply from 1 July 2012. This start date will enable the Government to undertake an extensive consultation process.
As part of this process, the Assistant Treasurer, Mr Bill Shorten has released a consultation paper. The consultation paper outlines the existing treatment of the LAFHA benefits and implementation issues in relation to the proposed reform, including whether there is a need for special transitional arrangements to ensure there are no unintended consequences.
Personal income tax reform - Dependent Spouse Tax Offset
In addition to measures announced in the 2011-12 Budget, the Government will restrict eligibility for the Dependent Spouse Tax Offset to those with spouses born before 1 July 1952.
The Government notes that this reform will not affect people whose spouse is an invalid or a carer, or who receive the zone, overseas forces or overseas civilian tax offsets.
The previously announced tax measures which the Government now intends to defer include:
- The start date of the standard deduction for work related expenses will be deferred until 1 July 2013,
- The start date of the 50% discount for interest income will be deferred until 1 July 2013, allowing more time for consultation with stakeholders on issues previously raised by industry,
- The start date of the phase down in interest withholding tax for financial institutions will be deferred until 2014-15, and
- The start date of the new tax system for managed investment trusts will be deferred until 1 July 2013, allowing more time for consultation with stakeholders about how to best implement the elements of the package.