Interest income 50% discount
In response to the Henry Review, which recommended providing a discount for income tax purposes on interest income from savings, and taking into account industry submissions from various bodies, the Government has decided to give individuals a 50% tax discount on up to $1,000 of interest income earned per financial year. For example, if an individual taxpayer derives $1,000 in interest, they will only include $500 in their taxable income.
Not only does this take into account interest earned on deposits held with banks, building societies or credit unions, as well as on bonds, debentures or annuity products, it also applies to interest income earned directly or indirectly such as via a trust or via a managed investment scheme. This measure is clearly directed to encouraging community savings and to potentially open up the domestic pool of funds which banks can then lend to personal and business borrowers.
Individual taxpayers are to be provided with a standard deduction of $500 for work related expenses and the cost of managing their tax affairs from 1 July 2012
This amount will increase to $1000 affective from 1 July 2013.
It is not intended that the standard deduction precludes taxpayers with higher expenses deductible claiming the higher amount rather than the standard deduction amount.
It would seem that this simplicity for taxpayers will mean that taxpayers will be incentivised to rely on the use of a standard deduction. An interesting outcome of this measure may well be that Australian Taxation Office (ATO) audit activity is more focussed and directed at those taxpayers who claim deductions in excess of the standard deductions.
Personal tax rates
The Budget did not propose any changes to the currently legislated tax rates for 2010-11 as previously enacted.
Increase in the Medicare levy and Medicare levy surcharge low income thresholds
The Medicare levy low income threshold is to increase to $18,488 (an increase from $17,794) for singles, and to $31,196 (an increase from $30,025) for couples. For families, the additional amount of threshold for each dependent child or student will also be increased to $2,865 (an increase from $2,757).
The medicare low income threshold for pensioners below pension age will also be increased. The threshold will rise to $27,697 (an increase from $25,299) for the 2009-2010 year.
Raising of medical expenses rebate threshold
The medical expenses rebate threshold is to increase from $1,500 to $2,000 effective 1 July 2010. Furthermore, from 1 July 2011, the threshold is to be indexed annually in accordance with the CPI.