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Creation Date: Wed, 12 May 2010 GMT

Federal Budget Brief F2011

Executive Summary

The F2011 Federal Budget is relatively frugal compared to previous years.

Key features include infrastructure funding, tax cuts, and a Renewable Energy Fund, with some new expenditure on planning and regulatory reform and the development of a population policy.

Here is a summary of the budget highlights.

1.0 Nation Building and Growth

+ A $5.6b infrastructure fund to invest in nation building spending over the coming decade, including a $700m initial contribution to be paid in F2013 and $735m in F2014;

+ More than $1b for the Australian Rail Track Corporation to enhance freight rail services;

+ $355m to upgrade and build GP Super Clinics;

+ Funding for a review of capital city strategic planning systems and a national population strategy; and

+ Private infrastructure investors will benefit from discounts on bond interest income.

2.0 Housing Affordability/Retirement Infrastructure

+ Common sense changes to the First Home Saver Accounts; and

+ $145m over four years in zero interest loans to improve retirement accommodation opportunities.

3.0 Capital Markets and Managed Investment Trusts

+ Corporate tax rates reduced to 28% by 2015, with an early start for small business;

+ The Government has commited to raise the superannuation guarantee charge to 12%, which will increase the savings pool available to property funds;

+ A bold new tax regime for Managed Investment Trusts - for more information, see www.propertyoz.com.au/MIT;

+ ASIC-approved, simpler and more efficient bond-raising documentation and prospectuses;

+ As part of the Government's strategy to increase banking competition, it has committed to reducing interest withholding tax for financial institutions;

+ Distribution withholding tax will be reduced to 7.5% from 1 July 2010 - this benefit will now encompass wholesale and state-operated funds;

+ A savings boost: 50% discount on interest earned on deposits, bonds, debentures and annuity products, with various strings attached;

+ Improved capital allowance regime with instant asset write-off and simplified asset pools for small business;

+ The Board of Taxation has been charged with removing barriers to Islamic finance;

+ $24.1m to establish a Centre for International Finance and Regulation (CIFR) as a regional centre for excellence; and

+ Creation of a taskforce to progress an Asia Region Funds Passport.

4.0 Climate Change and Environment

+ $652.5m over four years for a Renewable Energy Future Fund, which will specifically encompass building energy efficiency and small-scale renewable energy projects, such as co/tri-gen; and

+ A $109m redesigned Green Loans Program for sustainability audits and energy efficiency improvements in homes.
5.0 Skills

+ A $661m Skills for Sustainable Growth Strategy to increase training places, including $200m for a critical skills investment fund focusing on the construction sector.

6.0 Technical/Other issues

+ Capital Gains Tax rollover measures which allow trusts to restructure, making it easier for takeovers and mergers using scrip for scrip.

+ GST amendments:

- clarify the structure of the margin scheme rules and put in place common sense reforms that allow proper valuation of subdivisions; and
- tighten rules to make it harder to claim reduced input tax credits on trustee fees which could increase GST costs - we are looking very closely at this proposed measure.

For the full report please go to this link