Skip to main content

Your shopping cart is empty

Budget 2003 - a Two Part Budget

Publication date: 13 May 03 | Source: THE TAX INSTITUTE

The Domestic Budget:

"In the first instance, it addresses the domestic side which is dominated by the reduction in income tax. However, all it really does is address the "bracket creep" over the past three years" advises Gil Levy.

The tax reduction is a good outcome for pensioners and low income earners. The value of the tax rate reduction is further enhanced by the increase in the low income tax offset from $150 to $235 per year.

"The Taxation Institute recognises this as being a positive to self funded retirees - particularly those whom receive the Senior Australians Tax Offset, however, we are disappointed that the maximum marginal tax rate has not been reduced"

"In addition, we are frustrated that the amendments to address the unfair aspects of section 109UB have not been detailed in the budget despite the Treasurer's announcement of 12th Dec 2002 and substantial effort by the professional bodies to make submissions by the 22nd April 2003"

"We also welcome the much overdue changes to the Personal Services Income Rules (Contractors Tax) in respect of Losses and Fringe Benefits Tax"

The International Budget:

"On the International front, we at the Taxation Institute generally welcome the proposed changes to the treatment of controlled foreign companies and branches, although the devil will be in the detail. Significantly Australian business is being encouraged to invest in active businesses overseas in two ways. First by exempting dividends and branch profits from Australian Tax, regardless of the country of source and secondly, by exempting Australian business from CGT on the sale of non portfolio investments in such active businesses" said Gil Levy.

In turn, the compliance costs associated with operating through a controlled foreign company will be reduced via the easing of attribution of concessionally taxed income overseas.

The exemption of complying superannuation funds from the Foreign Investment Fund rules (FIF) will greatly assist the superannuation industry to access a broader range of offshore investments without being concerned about tax on unrealised gains.

"In addition, we welcome the exemption from CGT for non residents with interests in non portfolio investments in Australian managed funds. It addresses a current anomaly where non-residents would be exempt from CGT if they held those investments directly" completed Mr Levy.

(The Taxation Institute will continue to provide commentary on the International tax reform proposals in more depth over the coming weeks)