1. Changes effective 1 July 2013 (i.e., 2013/14 income year)
1.1 Medicare levy low income thresholds
For 2013/14, the Medicare levy low income thresholds will be as follows:
Individuals $20,542 (no increase from 2012/13)
Families $34,367 (previously $33,693)
The families income threshold (i.e., $34,367 will be increased by $3,156 (previously $3,094) for each dependent child or student.
1.2 Superannuation – a fairer excess contributions tax system
Currently, superannuation contribution that exceed the non-concessional contribution cap (i.e., $150,000 per annum or $450,000 over a 3-year period for individual under the age of 65) are basically subject to excess contributions tax at the rate of 46.5%. In contrast, excess concessional contributions may be taxes more concessional under new rules that apply from the 2014 income year (e.g., excess concessional contributions are now effectively taxed at an individual’s marginal tax rates, and an individual can elect to have up to 85% of their excess contributions withdrawn from their fund).
For contributions made from 1 July 2013 which exceed the non-concessional contributions cap, the government will allow individuals the option of withdrawing the excess contributions and any associated earnings, with these earnings to be taxed at the individual’s marginal tax rate. Final details of the policy will be settled following consultation with key stakeholders in the superannuation industry.
This ensures the consistent treatment of excess concessional and non-concessional contributions.
2. Changes effective 1 July 2014 (i.e., 2014/15 income year)
2.1 Temporary Budget Repair Levy (increase in top marginal tax rate)
From 1 July 2014, the government will introduce a 3-year temporary levy(‘the Temporary Budget Repair Levy’) on individual with taxable incomes in excess of $180,000 per annum (and, therefore paying tax at the top marginal rate – currently, 47%, including the Medicare Levy), until 30 June 2017.
From 1 July 2014 until 30 June 2017, the Temporary Budget Repair Levy will apply at a rate of 2% on an individual’s taxable income in excess of $180,000 per annum.
This means that:
Individuals with a taxable income of $180,000 or below will not pay the levy;
Individuals with a taxable income of $200,000 will pay 2% of $200,000 or $400 of levy;
Individuals with a taxable income of $300,000 will pay 2% of 120,000, or $2,400 of levy.
A number of other tax rates that are currently based on calculations that include the top personal tax rate will also be increased. These tax rates will be increased for the same period that the Temporary Budget Repair Levy is in place.
Furthermore, to prevent high income earners from utilising fringe benefits to avoid teh levy (e.g., through salary packaging) the FBT rate will be increased from 47% to 49% from 1April 2015 until 31 March 2017 to align with the FBT year. The cash value of benefits received by employees of public benevolent institutions and health promotion charities, public and not-for-profit hospitals, public ambulance services and certain other tax-exempt entities, will be protected by increasing the annual FBT caps. In addition, the fringe benefits rebate rate will be aligned with the FBT rate from 1 April 2015.
2.2 Abolishing the Dependent Spouse Tax Offset
From 1 July 2014, the government will abolish the DSTO for all individual taxpayers.
Currently, the DSTO is only available in respect of a dependent spouse born before 1 July 1952. However, taxpayers entitled to claim the Zone Tax Offset, the Overseas Forces Tax Offset and the Overseas Civilians Tax Offset are still able to claim their full notional entitlement to the DSTO (i.e., irrespective of the spouse’s age) as part of these tax offsets.