2.3 Abolishing the Mature Age Worker Tax Offset

From 1 July 2014, the government will abolish the MAWTO.

Currently, the MAWTO is only available in respect of a resident individual who was born before 1 July 1957 and who has an amount of net income from working of less the $63,000 for an income year.

The government believes that encouraging mature age workers to participate in the workforce can be done more effectively through direct payments or incentives. In particular from 1 July 2014, under the government’s new Restart Programme, a payment of up to $10,000 may be available to employers who hire a full-time mature aged job seeker (aged 50 years or over) who has been unemployed for at least six months (including those receiving the Disability Support Pension).

Specifically, under the Restart Programme, payments will commence after the worker has been employed (with an employer) for at least six months, and will be paid in the following instalments:
• $3,000 will be paid after the first six months of employment;
• $3,000 will be paid after 12 months of employment;
• $2,000 will be paid after 18 months of employment;
• $2,000 will be paid after 24 months of employment.

To be eligible, employers will need to demonstrate the job they are offering is “sustainable and ongoing”, and that they are not displacing existing workers with subsidised job seekers.

2.4 Abolishing the First Home Saver Accounts scheme

The government will abolish the FHSA scheme due to lower the forecast take-up rates.

New accounts opened from Budget night (13 May 2014) will not be eligible for concessions, with the government co-contribution to cease from 1 July 2014, and tax concessions and the income and asset test exemptions for government benefits associated with these accounts to cease from 1 July 2015.
As of 1 July 2015, account holders will be able to withdraw their account balances without restriction. Furthermore, once the FHSA scheme is abolished, theses accounts will be treated like any other account held with a relevant provider.

2.5 Family Payment Reform – maintain family tax benefit rates for two years

The government will maintain current FTB payment rates for two years commencing from 1 July 2014. Under the measure, indexation of the maximum and base rates for FTB Part A and the rate of FTB Part B will be paused until 1 July 2016.

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.

The finalisation of TR2013/5, Income tax: when a superannuation income stream commences and ceases, generated much discussion in the media and industry on the ATO’s view that a pension cease when a fund does not pay the required annual minimum pension amount.
The ATO subsequently considered circumstances that warrant granting an exception that would allow a super income steam to continue, so the fund can claim exempt current pension income (ECPI), even though the annual minimum pension payment requirements have not been met.
The ATO published a Q&A on its website some months ago to highlight the conditions that meed to be satisfied to allow a fund to continue to claim ECPI.
Generally, if a catch up payment is made as soon as practicable, the fund may be able to continue to treat the pension as continuing. when:
• the pension underpayment is less then one twelfth of the minimum pension payment required; or
• the failure to pay the minimum pension payment was because of matters outside
the control of the trustee.
Some of the common circumstances when this exception has been granted are:
• the trustee of a fund has a serious ongoing medical condition that was supported
by documented medical certificates; or
• genuine bank errors when the error was on the part of the bank and not the trustee
(supported by evidence from the bank).
The ATO is currently updating its web material to provide further guidance on when the exception applies (for example, the new material will confirm that the exception can also apply to an allocated pension).

If a taxpayer is 65 years old or over, but under 75, they will need to satisfy the ‘work test’ in each financial year a contribution is made to their super account.
To satisfy the work test, the taxpayer must be gainfully employed for at least 40 hours during a consecutive 30-day period each financial year in which the contributions are made.
The ‘work test’ requirement must be satisfied for the year when the contributions are made rather then when contributions are allocated to their super account.
Ref: ATO – ‘SMSF News” – Edition 29