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The matching rate of 100 per cent and the maximum co-contribution that is payable on an individual’s eligible personal non-concessional contribution of $1,000 is proposed to be permanently retained.

Comment

Under announcements made in the 2009 Budget the co-contribution matching rate was to be reduced from 150% to 100% before being increased to 125% and then back to 150%.  Under the 2010 Budget announcement this planned increase will not proceed and the maximum rate of co-contribution will be capped at $1000.

The Government has proposed to increase the benchmark interest rate that applies to capital protected borrowings to the Reserve Bank of Australia (RBA) indicator rate for standard variable housing loans plus 100 basis points. Prior to this announcement the benchmark interest rate was set at the RBA indicator rate for standard variable housing loans.

In accordance with the tax cuts announced in the 2008 budget, the personal income tax thresholds for the 2010- 2011 year will be as follows:

The Government plans to introduce a standard deduction for work-related expenses and the cost of managing tax affairs. The standard deduction will be $500 for the 2012/13 financial year, and then $1,000 for the 2013/14 and subsequent financial years.

The Government proposes that savings in an FHSA can be paid into an approved mortgage after the end of a minimum qualifying period, rather than requiring it to be paid to a superannuation account. The current rules require that FHSA holders keep their savings in an FHSA for 4 financial years before they are able to use those savings to buy a home. At present if an account holder buys a home before the end of that 4-year period, the balance of their FHSA must be transferred to their superannuation.

The Government plans to provide a 50% tax discount on up to $1,000 of interest earned by individuals, including interest earned on deposits held in authorised deposit taking institutions, bonds, debentures and annuities.  Currently there are relatively higher levels of taxation applying to interest income, compared to other forms of investment income. The discount will be available for interest income earned directly as well as indirectly, such as via a trust or managed investment scheme, and is expected to benefit around 5.7 million taxpayers in 2011-12.

From a superannuation and investment perspective there were no big surprises in the Budget.

The faster than expected return of the Budget to surplus, three years ahead of schedule in 2012-13, is good news for all investors. However, the return to surplus is predicated on a continuation of the resources boom and economic growth in China.

The good news from last night’s Budget was:

US stocks fell on Tuesday as rising inflation in China led investors to expect further tightening in that country, prompting worries over the potential impact on demand for companies reliant on global growth such as Alcoa, 3M and Caterpillar. Questions over the European Union's bailout plan also weighed on investors.

Business confidence and job advertising weakened in April, signalling that a rapid increase in interest rates is now starting to cool the economy. Business confidence levels fell for the second consecutive month in April as sentiment across the retail, building and transport sectors soured, according to a survey by the National Australia Bank. NAB's monthly business survey found confidence in April fell 3 points to an index reading of plus 13, still above the long-run average of plus 7. Business conditions fell 5 points to plus 8, NAB said.