The only constant about tax is change. Dr Adrian Raftery, a senior lecturer at Deakin University and author of 101 Ways to Save Money on Your Tax – Legally! 2014-2015 edition (Wrightbooks, June 2014, AU$24.95), provides us with some of the tax changes coming into play from July 1, 2014.
Medicare levy increasing to 2 per cent
From July 1, the government will raise the Medicare levy by half a percentage point to 2 per cent to provide a funding stream for DisabilityCare Australia.
Temporary budget repair levy
The 2014-15 federal budget announced that a 2 per cent levy would be introduced for the excess taxable income above $180,000 for three years from July 1, 2014 (for example, an individual with a taxable income of $200,000 will pay a levy of $400 being 2 per cent of $20,000). With the increase in the Medicare levy by half a percentage point to 2 per cent, this means that the highest marginal tax rate (as well as the FBT rate) will effectively jump from 46.5 to 49 per cent for the 2014-15, 2015-16 and 2016-17 years.
Net medical expenses tax offset being phased out
There is a gradual phasing out the net medical expenses tax offset. Only those taxpayers who claimed the medical tax expenses offset in 2012/13 and again in the 2013/14 year can continue to be eligible for this rebate in 2014/15 (pending having net expenses above the relevant thresholds). The offset will continue to be available for out-of-pocket medical expenses relating to disability aids, attendant or aged care until July 1, 2019.
Dependent spouse and mature age worker tax offsets abolished
In changes proposed in the 2014 federal budget, the government plans on abolishing both the dependent spouse tax offset (previously worth up to a maximum $2,471) and the mature age worker tax offset (up to $500).
Super guarantee contributions increase
The superannuation guarantee contributions (SGC) will have a 0.25 per cent increase in the 2014–15 financial year to 9.5% of ordinary time earnings. There will be no further increases until July 1, 2019 when there will be annual 0.5 per cent rises until the SGC reaches 12 per cent in 2022–23.
Super contribution limits lifted
The concessional contributions limit will be lifted to $30,000 for all individuals and to $35,000 for those aged 50 and over.
Introduction of My Tax
From the 2014-15 income tax year, the ATO will provide an online pre-prepared tax return for people without complex tax affairs. Australian resident taxpayers will be able to use MyTax if they have income only from salary, wages, allowances, bank interest, dividends and/or Australian government payments. The only deductions allowed are for work-related expenses, expenses related to interest or dividend income, donations and/or the costs of managing their tax affairs, and the only offsets that can be claimed are the senior and pensioner tax offset and/or zone and overseas forces tax offset. Taxpayers are ineligible to use MyTax if they have business income or losses, rental properties, partnerships or trusts (including managed fund investments), capital gains or losses, foreign income, lump sum payments, employee share schemes or superannuation income streams and lump sum payments.
LAFHA rules limited to all
Access to the previously generous tax concessions for the living away from home allowance (LAFHA) is no longer available from July 1, 2014, regardless of the date of their employment contract. The new LAFHA concessions can only be claimed by people who maintain a home for their own use in Australia that they are living away from for work. In addition, the LAFHA concessions can only be used for the expenses of people who are legitimately maintaining a second home in addition to their actual home for a maximum period of 12 months.
First home saver accounts scheme abolished
The 2014-15 federal budget announced that the FHSA scheme will be abolished from July 1, 2015 with account holders being able to withdraw their balances without restriction at that date. Whilst existing account holders will continue to receive the government co-contribution (and all associated tax and social security concessions) for the 2013-14 income year, new accounts opened from May 13, 2014 will not be eligible for any concessions.
Research & development (R & D) tax incentive reduced for small businesses
Companies with annual Australian turnover of less than $20 million will have the R&D tax incentive reduced from 45 per cent to a 43.5 per cent refundable tax offset from July 1, 2014.