Need a quick breakdown on how the Federal Government’s mid-year economic outlook will affect your business? Read on.
When the economy and business compliance are discussed in the media do your ears tune in or out? Are they topics that appeal as much as bitter cough syrup you know must drink but avoid until the last minute? Here’s an easy to read update that should make your medicine a little easier to swallow…go on, it might help you keep your business healthy.
The Federal Government recently announced the 2012-2013 MYEFO (Mid-Year Economic & Fiscal Outlook). The MYEFO is a mid‑year budget report that provides updated information on, and assessment of, the government’s fiscal performance since the Federal Budget was revealed six months earlier. It has also prompted key policy changes that you should take notice of.
Local and global economic conditions play a huge part in determining changes in fiscal strategy. According to the report, the fundamentals of the Australian economy remain strong and the outlook remains positive, despite a weaker global economic outlook. Our economy continues to outperform every major advanced economy, with the country’s real GDP forecasted to grow 3 percent in both 2012‑13 and 2013‑14. In comparison:
- Euro area GDP: – ½ percent (2012) and ¼ percent (2013)
- US GDP: 2 percent (2012) and 2¼ percent (2013)
- Japan GDP : 2 ½ percent (2012) and 1 ¾ percent (2013)
- India GDP : 5 ½ percent (2012) and 7 percent (2013)
- China GDP: 7 ¾ percent (2012) and 8 percent (2013)
After examining local and global economic conditions, as well as fiscal performance of the past six months, the Federal Government has proposed some key policy changes that could impact SME operators, their staff and families. Some of these are:
1. Monthly PAYG instalments for large companies – from 1 July 2013 onwards
For large companies, the aim is to align tax instalments with their income and trading conditions (and their GST payments) by requiring them to make PAYG income tax instalments monthly, rather than quarterly.
The challenge for these large businesses is to keep an eye on their cash flow to ensure they meet their new monthly tax obligations.
At present, smaller businesses pay their company tax obligation every quarter with their PAYG payment.
2. Private Health Insurance Rebate will be indexed by inflation (April 2014 inwards)
The government’s contribution to private health insurance will be calculated using commercial premiums as at 1 April 2013 and then indexed annually by the lesser of CPI or the actual increase in commercial premiums. This will be used to determine an individual’s private health insurance rebate.
At present, 30 percent of your total private health insurance is paid by the government as a rebate (the amount varies based on the individual’s salary). Previously, if your insurance premium increases by say, 15 percent, the government would pay 30 percent of that 15 percent increase. The proposed change means that the rebate will be indexed by inflation (currently at 1.2 percent). So if the cost of health insurance increases above current inflation rates, the individual will bear the extra costs.
3. Baby bonus decrease effective 1 July 2013 onwards
The Federal Government will reduce the Baby Bonus payment for second and subsequent children to $3,000 from 1 July 2013. The Baby Bonus will remain at $5,000 for the first child of eligible families and for multiple births. The payment will continue to be paid in 13 fortnightly instalments.
The reduced amount could affect the number of requests for parental leave pay as both cannot be paid for the same child. If you are eligible for both payments, you will need to choose which payment is best for you – check the Paid Parental Leave Comparison Estimator.
Hopefully we’ve made the MYEFO more interesting for your business here. Australian business owners and managers are known for digging deep, embracing change and adapting, and it shows in our economic outlook.
Note the above is just a snapshot, so if you’d like to know more about the MYEFO, visit: http://www.budget.gov.au/2012-13/content/myefo/html/index.htm
