Australia: 2011/12 Federal Budget Summary

Last Updated: 11 May 2011
Article by Syd Jenkins

The major Budget announcements were:


Dependent spouse rebate

Will be phased out for dependent spouses aged less than 40 to encourage them to go back to work. The exception is for taxpayers with an invalid or permanently disabled spouse, supporting a carer, or people who are eligible for the zone, overseas forces and overseas civilian tax offsets.

Low income tax offset for low to middle income earners

The low income tax offset that is delivered to low and middle income earners through their regular pay during the year will be increased from 50% to 70% of their total entitlements from 1 July 2011. The remaining 30% will be paid on assessment of the income tax return for the relevant year.

Low income tax offset for minors

The ability for children under 18 years of age to use the low income tax offset for certain income (namely passive income such as interest and dividends) will be limited from 1 July 2011. This would discourage distributions the minor may ordinarily receive from a family trust. Income earned by minors from paid work will continue to be eligible for the low income tax offset.

Self-education expenses

These will no longer be deductible against all government assistance payments from 1 July 2011. This change follows the recent High Court Decision in FC of T v Anstis.

HECS discount

The discount on up-front payments will be reduced from 20% to 10%, and the bonus on voluntary payments to the Tax Office of $500 or more will be reduced from 10% to 5% from 1 January 2012.

Family Tax Benefit and family payments adjustments

Family Tax Benefit Part A

  • families will be eligible for an advance of up to 7.5%, up to a maximum of $1,000 of their annual entitlement from 1 July 2011. This will be repaid over 6 months by reducing future fortnightly Family Tax Benefit Payment.
  • will be limited to children up to 21 years of age from 1 January 2012. The child should consider alternative benefits such as Youth Allowance.

Indexation of Family Tax Benefit Part A and B supplements will be suspended for 3 years and indexation of family payment higher income thresholds and limits will also be paused at their current level until 1 July 2014 (rather than being CPI-indexed). This means that income thresholds for Family Tax Benefit Part A and B, dependency tax offsets, the Baby Bonus, Paid Parental Leave should remain largely unchanged.


Loss recoupment tests

The continuity of ownership test will be amended to make it easier for companies to recoup losses from the 2011-12 income year. The ownership tracing rules through certain superannuation entities and for shareholders of widely held entities (mainly ASX listed companies) will be modified to simplify the requirements and to correct technical deficiencies.

Capital Gains Tax (CGT) measures

Small business CGT concessions

Will be expanded for some small businesses, but continuing the recent targeting of trust structures, will be tightened for trusts from 10 May 2011.

Renewable resources or environmental benefits

Gains or losses from renewable resource assets (e.g. solar hot water systems) or preserving environmental amenity (e.g. vegetation) will be CGT exempt, retrospectively, from the 2007-08 income year.

Scrip for scrip rollover

The scrip for scrip rollover integrity provisions that currently apply to individuals and companies will also apply to trusts, superannuation funds and life insurance companies from 10 May 2011.


  • Scrip for scrip rollover relief will be amended to ensure that for the exchange of shares in one company for shares in another company there is a deferral of profit or loss where the original shares are held on revenue account at the time of the exchange. This applies from 10 May 2011.
  • Rollover relief will be extended for certain disposals of assets by a trust to a company (from 10 May 2011) or to another trust (retrospectively from 1 November 2008) in certain situations.
  • Amendments to ensure that gains and losses arising from life insurance policies that are generally exempt from CGT are not taxed under another tax provision, will apply retrospectively from the 2005/06 income year.
  • Legislating the accepted practice of allowing a testamentary trust to distribute an asset of the deceased without a CGT event happening.
  • Various concessions will apply to special disability trusts to make them more beneficial to families.

Fringe Benefits Tax (FBT) measures

Statutory formula for car fringe benefits

The statutory fractions that currently apply will be phased out and will be replaced with a 20% flat rate for new vehicles purchased from 10 May 2011 which will be phased in over 4 years.

The current statutory fractions range from 7% to 26% and the rate that applies is based on the kilometres travelled. The higher the kilometers travelled, the lower the statutory rate, and the lower the FBT. The new rate will apply regardless of kilometres travelled.

Depreciation measures

Small business motor vehicle depreciation

An instant tax write-off of the first $5,000 of any motor vehicle purchased from 1 July 2012. The remainder of the purchase value can be transferred into the general small business depreciation pool, which is depreciated at 15% in the first year and 30% in later years.

Financial arrangements


The Taxation of Financial Arrangement (TOFA) rules relating to hedging will be amended to ensure they operate as intended.

Debt/equity rules

Will be amended to limit the application of an integrity provision that deems an interest from an arrangement that funds a return through connected entities to be an equity interest under certain circumstances.

Securities lending arrangements

The tax rules for certain securities lending arrangements will be amended to ensure that the lender under a securities lending arrangement is treated as not having disposed of the lent securities.

GST Measures

While there are three important announcements of changes to GST, the Budget is notable for the announcement that previously announced changes will now be deferred to unannounced start dates linked to when the relevant legislation is passed. The deferred announcements include:

  • Adoption of the self assessment regime for indirect taxes
  • Reforming the change of use adjustments
  • The allowance of adjustments for pre-registration acquisitions
  • Simplifying the grouping rules
  • Changes to the indirect tax sharing agreement provisions
  • The introduction of reverse charges for supplies of going concerns and farmland
  • Changes to tax law partnerships
  • he treatment of certain business to business supplies as taxable

The newly announced changes include proposed changes to Div 105 of the GST Act to clarify its operation to mortgage lending. The changes will clarify that s 10 will operate to the exclusion of other provisions and reduce compliance costs in relation to reporting for entities in the mortgage lending sector.

With effect from 1 July 2000 certain supplies made to health insurers in settling claims for health insurance will be GST-free. This follows the decision in FC of T v Secretary to Department of Transport (Vic) where input tax credits were allowed in relation subsidies paid to taxi cab operators.

The third announcement in relation to GST will allow small businesses that are in a net refund position to access the GST instalment system. By allowing the choice taxpayers will have earlier access to refunds and will reconcile their annual position in their annual return. The measure will commence when the relevant legislation receives royal assent.

International Tax

The Budget did not include any significant new international tax changes but did announce the expansion of the list of countries whose resident are eligible to access reduced withholding rates on certain distributions from Australian managed investments. Countries now included include Singapore, the Cayman Islands, the Bahamas, Monaco, San Marino and Belize as well as a number of other small jurisdictions.


Losses for designated infrastructure projects will be uplifted by the government bond rate.  The losses will also be exempted from the continuity of ownership test and same business test.  The changes will apply from Royal Assent.  The measure will improve certainty for investors by ensuring the value of losses over the long period for some projects.


For the first year and only that year, on or after 2011-2012 an eligible individual will be able to elect to have excess concessional contributions to a superannuation fund to be refunded and taxed at their marginal rate.  The treatment will only apply for the first $10,000 of excess contributions.  This change will provide a benefit where their marginal rate is lower than the 46.5% (including Medicare levy) rate that would otherwise apply.

As previously announced, eligible individuals aged 50 and over with total superannuation balances of less than $500,000 will have an increased concessional contribution cap of $50,000.  This will apply from 1 July 2012.

With effect from Budget night the Government will remove the trading stock CGT exception for specified assets of complying superannuation funds. The change will mean that the CGT provisions will be the primary code for taxing gains and losses of complying superannuation funds.  This will prevent the offset of losses on trading stock against income and not capital gains.

With effect from 1 July 2012 employees will receive more information about their superannuation contributions (on their pay slips) and from their fund where regular contributions cease.

The concession available over the last three years to reduce minimum pension drawdown amounts by halving the minimum amount will be phased out.  For the 2011-2012 year the reduction will be 25% and there will be no reduction for 2012-2013.

The current freeze on indexation applied to the income threshold above which the maximum superannuation co-contribution begins will continue for 2012-2013.  The thresholds will continue at $31,920 phasing down for incomes up to $61,920.

Not-for-profit sector

A new independent statutory agency and a Charities and Not-for-profits Commissioner will be introduced together with a statutory definition of 'charity.'  These reforms are intended to ensure that the concessions are targeted only at those activities that directly further the entities altruistic purpose.  The changes will apply from 1 July 2011 but will initially only apply to new commercial activities commencing after 10 May 2011.  The concessions include FBT, GST and deductible gift recipient exemptions and concessions.

For those activities being carried on at 10 May 2011 the Government will consult on the phasing out of the concessions over time.  The changes will not apply where the proceeds from the unrelated activities are directed back to the entities altruistic purpose.

Other measures

Amongst a number of other measures the Government has announced:

  • Early access within 12 months to farm management deposits for natural disaster victims.
  • The roll-out of the National Rental affordability Scheme (NRAS) will be undertaken over a longer period with priority given to flood-affected areas.
  • The Commissioner will now have a discretion to extend the two year exemption period where a deceased's home can be sold CGT free.
  • New reporting arrangements for those making payments to building and construction industries and consultation on reporting systems for the commercial cleaning industry.


Syd Jenkins and Davide Costanzo, Moore Stephens Perth

This summary is not intended to be a comprehensive examination of the 2011-12 Federal Budget.  Please contact your Moore Stephens relationship partner for a detailed explanation of how any of these matters and other Budget measures may apply to you.

This publication is issued by Moore Stephens Australia Pty Limited ACN 062 181 846 (Moore Stephens Australia) exclusively for the general information of clients and staff of Moore Stephens Australia and the clients and staff of all affiliated independent accounting firms (and their related service entities) licensed to operate under the name Moore Stephens within Australia (Australian Member). The material contained in this publication is in the nature of general comment and information only and is not advice. The material should not be relied upon. Moore Stephens Australia, any Australian Member, any related entity of those persons, or any of their officers employees or representatives, will not be liable for any loss or damage arising out of or in connection with the material contained in this publication. Copyright © 2009 Moore Stephens Australia Pty Limited. All rights reserved.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions