Welcome to Announcer's 2009-10 Federal Budget Newsletter.What an interesting time to produce a budget! The economies all around the world are falling into recession and Australia is no exception.

The budget has produced its forecasts for the economy with GDP expected to fall by 0.5% in 2009-10 and then begin to recover in 2010-11 with a growth of 2.25% and then begin expanding by 4.5% pa for 2011-12 and 2012-13. In order to have this happen the Government has had to make some changes. The centrepiece of the Budget is a $22billion program of investment in nation building infrastructure, including roads, rail, ports, universities and energy efficiency.

But with the economy forecast to begin turning around in 2010-11 now is a great time to start looking at investing. Below is a snapshot of some of the budget announcements as they effect the financial side of our lives.

For a full copy of the budget please visit http://budget.australia.gov.au. If you have any questions regarding how the budget affects you personally please contact your advisers at Announcer.

First Home Owner's Boost (FHOB)

For eligible first home buyers entering into contracts between 1 July 2009 and 30 September 2009 (inclusive) the FHOB will continue to provide $7,000 for the purchase of established homes and $14,000 for the purchase of new homes.

This means that including the $7,000 First Home Owner's Grant, until 30 September, purchasers of new homes will continue to be eligible for $21,000 of assistance, and purchasers of existing homes will continue to be eligible for $14,000 of assistance.

Between 1 October 2009 and 31 December 2009 the FHOB grants will be $3,500 for the purchase of established homes and $7,000 for the purchase of new homes. This means that including the $7,000 First Home Owner's Grant, from 1 October until 31 December, purchasers of new homes will be eligible for $14,000 of assistance, and purchasers of existing homes will be eligible for $10,500 of assistance.

The FHOB grants are in addition to the existing $7,000 grant under the First Home Owners Scheme.

Small business incentives

The Government has extended the bonus deduction of 50 per cent available to small businesses that acquire an eligible asset between 13 December 2008 until 31 December 2009 and install it ready for use by 31 December 2010.

Private Health

From 1 July 2010, the government will introduce three new “Private Health Insurance Tiers” in respect of the Private Health Insurance Rebate as shown below and to ensure that middle and high income earners do not abandon their private health insurance.

The Government has introduced variable rates of Medicare Levy surcharge. If appropriate private heath insurance cover is not held and certain income thresholds are exceeded the surcharge will be charged as detailed below.

Tax Rates

The government has retained its election promise to deliver the tax cuts outlined below

Co - Contribution

A temporary reduction of the maximum Government co-contribution from $1,500 p.a to $1,000 p.a has been announced.

This will apply to eligible personal superannuation contributions made on or after 1 July 2009 and return to the current rates in 2014-15.

Concessional Contributions

The Government has announced that, effective 1 July 2009, the concessional contributions cap (CC) will be reduced to $25,000 (indexed) per annum. Concessional contributions generally include employer, salary sacrifice contributions and personal deductible contributions.

The transitional CC, which applies to individuals aged 50 and over at any time during the transitional period (2007/08 to 2011/12), will be halved from $100,000 pa to $50,000 pa (not indexed) for the 2009/10, 2010/11 and 2011/12 financial years.

*In this table, concessional contributions caps have been calculated as the 2009/10 concessional contributions cap indexed to AWOTE at 4% pa, rounded down to the nearest $5,000.

Age pension

Pension payments to increase

The Government announced an increase to the Age Pension to take effect from 20 September 2009. The full rate single pension will be increased by $32.49 a week, while the full rate pensioner couples (combined) pension will be increased by $10.14 a week.

These increases will be provided in two forms: through an increase in the base rate of pension for singles and an increase through the new Pension Supplement for both singles and couples.

For the basic single pension rate, the Government will provide a $30 per week increase. For the new Pension Supplement, the Government will provide a:

• $2.49 per week increase for singles; and
• $10.14 per week combined increase for couples.

The above increase will also apply to pensioners who receive the Veterans' Service Pension and Income Support Supplement.

Another important change is the consolidation of the existing Goods and Services Tax Supplement, Pharmaceutical Allowance, Utilities Allowance and Telephone Allowance together with the increases noted above, into the new Pension Supplement.

Increase in the age for access to the aged pension

People born after January 1, 1957 will no longer gain access to the aged pension until they are 67.

Maximum income for receiving single part-pension falls from $47,444 to $38,693 and for couples from $72,423 to $59,288.

Pension drawdown relief continued

In a press release on 18 February 2009, the Government announced that clients in account based pensions, allocated pensions and term allocated pensions (TAPs) would only be required to draw down half their calculated minimum income requirement3 for 2008/09. This relief has been extended for a further 12 months to 30 June 2010.

The reduced drawdown rates are set out in the table below.

Family tax and maternity

The Government announced it will introduce a paid parental leave scheme. The scheme will be funded by the Government and is intended to commence on 1 January 2011. Parents will be able to lodge claims from 1 October 2010.

Payments under the scheme will be paid to the primary carer at the adult federal minimum wage (currently $543.78 per week) for a period of up to 18 weeks. Payments made under the paid parental leave scheme will be treated as taxable income and will affect entitlement to family assistance payments, but will not be counted as income for income support payments.

Primary carers (such as stay at home mums) who do not qualify for the scheme or those people who elect not receive paid parental leave can still access the baby bonus or Family Tax Benefit Part B where they meet the eligibility requirements for those benefits.

Primary carers will be eligible for the scheme if they:

• Earned less than $150,000 in the full financial year prior to the birth or adoption of a child;
• Have worked at least 330 hours over the 10 months (equivalent to around one full day of work each week) preceding the birth or adoption of a child; and
• Have also worked continuously with one or more employers for at least 10 of the 13 months before the expected date of birth or adoption.

Paid parental leave also will be available to contractors, casual workers and the self employed.

Employer funded leave

Parents who are eligible for the scheme will be able to continue to access employer funded leave around the time of the birth or adoption of the child. This includes employer provided maternity and recreation leave. Government funded paid parental leave can be taken in conjunction with, or in addition to, employer provided paid leave.

Effect on baby bonus and other family benefits

Parents who choose to receive paid parental leave will not be eligible to receive the baby bonus, except in the cases of multiple births where parents will not receive the baby bonus for the first child only.

Parents who choose to receive paid parental leave will not be entitled to the following benefits for the 18 weeks whilst in receipt of paid parental leave:

• Family Tax Benefit Part B
• Dependent spouse
• Child-housekeeper
• Housekeeper tax offset