The 2011/2012 Federal ‘nip and tuck’ Budget
The 2011/2012 Federal Budget was a ‘nip and tuck’ Budget. Many of the changes were either because of or justified by the need to improve the workforce participation rate to counter the declining unemployment rate from the current level of 5% to 4.5% by June 2013. Others were simply to fulfil the promise of bringing the budget into surplus.
Some changes were more than cosmetic with a temporary flood and cyclone reconstruction levy set to apply in the 2011/2012 income year to those who earn over $50,000 (adding $1.725bn to Government revenues over 5 years). FBT changes will add an additional $970m over 5 years. And, a few tucks will be made to the tax system with restrictions to income splitting, the phasing out of the dependent spouse tax offset, and removing the ability for minors to access the low income tax offset on unearned income.
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Earn-out relief is still a way off
Q. I read your recent comments on earn out rights and the budget changes proposed for their CGT treatment.I previously sold a business in 2003 with an earn out right.It was paid out in December 2007. Will this budget change provide any relief for my situation?
A. Unfortunately the most likely answer is no. At this stage we only have the budget announcement about the change so we will need to wait and see the detail of the legislation to enact the change.
However the budget indicated that the effective date for the change would be the date of Royal Assent to the amending legislation with some transitional arrangements being provided from 17 October 2007. From your information it sounds as though your CGT event and most of your earn out rights occurred prior to this date.
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