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Budget Night Benefits

May 8th, 2007 at 12:37 pm

The Australian Treasurer handed down the annual budget tonight, and, as expected in an election year, there are some generous handouts to "middle Australia" (ie. swinging voters). Those of personal interest are:
* A "one off" doubling of the government superannuation co-contribution for the 05/06 financial year. This means that DW and DS1 (who both made $1000 undeducted contributions into their superannuation accounts that year), will get a total of $3,000 in co-contribution, rather than the expected $1,500.
* Tax cuts at the "bottom end" starting from 1 July 2007. The threshold for the 30% rate has been increased from $28,000 to $30,000, and the low income earners tax rebate has increased from $600 to $750, which means anyone with taxable income less than $30K will pay 0% tax on the first $11,000 of income (the 15% tax rate normally applies above $8,000).

Having recently withdrawn $34,000 of unrestricted, undeducted, non-preserved money from my superannuation account (prior to the rule changes taking effect on 1 July), I'll now be able to salary sacrifice a large fraction of my salary for the next two years. This will
a) save tax on the sacrified amount (super contribution tax rate is 15% rather than the income tax rate of 30% which would otherwise apply)
b) reduce my taxable income down to around $30,000, so I'll be eligible for the $1,500 government superannuation co-contribution if I make a $1,000 undeducted super contribution (it may even end up being $3,000 if this year's "one off" increase ends up being repeated!)
c) substantially reduce our combined family taxable income so we are eligible for some Family Tax Benefit payments.

The others changes won't immediately affect us, but the childcare rebate changes should be good once DS2 starts preschool in a couple of years.

Enough Wealth

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