Budget 2015 | Personal Income Tax Changes
Increase to Medicare levy low-income thresholds
The Government will increase the Medicare levy low-income threshold for families from the 2014-15 financial year. The threshold for couples with no children will be increased to $35,261 per annum and the additional amount of threshold for each dependent child or student will be increased to $3,238 per annum.
The increase in these thresholds takes into account movements in CPI. There will also be an increase to the annual Medicare Levy low-income thresholds for individuals ($20,896) and pensioners ($33,044).
Changes to claiming a tax deduction for car expenses
The Government will modernise the methods of calculating work-related car expenses from the 2015-16 financial year. In doing so the ‘12% of original value method’ and the ‘one third of actual expenses method’, will be removed. The cents-per-kilometre rate will be modernised by replacing the three current rates based on engine size with a single rate of 66 cents per kilometre. In addition they will retain the ‘logbook method’ of calculating expenses. The Government has indicated this will not impact leasing and salary sacrifice arrangements.
Removal of an income tax exemption for Government employees
From 1 July 2016, the Government will remove the income tax exemption that is available to Government employees who earn income while delivering Official Development Assistance overseas for more than 90 continuous days. In doing so, foreign earnings income will be treated as assessable income in Australia.
The exemption will continue to apply to Australian Defence Force and Australian Federal Police personnel who deliver official Development Assistance for a charity or private sector contracting firm.
Zone Tax Offset changes
From 1 July 2015, the Government will exclude ‘fly-in fly-out’ and ‘drive-in drive-out’ workers from the Zone Tax Offset where their normal residence is not within a zone. The Zone Tax Offset applies to individuals in recognition of the isolation, uncongenial climate and high cost of living associated with living in identified locations. Eligibility is based on defined geographical zones.
Increase in Commonwealth penalty rates
The Government will increase the value of all Commonwealth penalty units from $170 to $180, with effect from 31 July 2015. This increase is broadly consistent with inflation since the value was last adjusted in December 2012. The Government will also introduce ongoing indexation of penalty units based on CPI. Indexation will occur on 1 July every three years, with the first indexation occurring on 1 July 2018. For example, these penalty rates apply to administrative penalties issued by the ATO to self-managed superannuation funds (SMSFs) for Superannuation Industry (Supervision) Act 1993 contraventions.
Tax changes for those temporarily working in Australia
From 1 July 2016, the Government will change tax residency rules to treat most people who are temporarily in Australia for a working holiday as non-residents for tax purposes, regardless of how long they are here for. Currently, where a holiday maker becomes a tax resident they are taxed based on resident tax rates, rather than the non-resident rates which is 32.5% from the first dollar of income.
Capping of FBT-exempt meals and entertainment
From 1 April 2016, the Government will introduce a single grossed up cap of $5,000 for salary sacrificed meal entertainment and entertainment facility leasing expenses (meal entertainment benefits) for employees of not-for-profits. In cases where the meal entertainment benefits exceed the new grossed up cap, it can also be counted towards their existing fringe benefits tax exemption or rebate cap. This means that all use of meal entertainment benefits will become reportable.
Employee share schemes
The Government will implement a variety of measures to take effect from 1 July 2015 that affect employee shares schemes. The measures are designed to make these schemes more attractive and accessible for all companies in Australia, and provide additional tax assistance to eligible companies through a start-up concession.
In summary the measure will:
- exclude eligible venture capital investment from the aggregated turnover test and grouping rules (for the start-up concession)
- provide the capital gains tax discount to employee share scheme interests that are subject to the start-up concession, where options are converted into shares and the resulting shares are sold within 12 months of exercise, and
- allow the Commissioner of Taxation to exercise discretion in relation to the minimum three year holding period where there are circumstances outside the employees control that make it impossible for them to meet this criterion.
HELP – Recovery of repayments from overseas debtors
From the 2016-17 financial year, HELP debtors residing overseas for six months or more will be required to make HELP repayments if their worldwide income exceeds the minimum repayment threshold.
GST for imported digital products and services
From 1 July 2017, offshore supplies of digital services and intangibles to Australian consumers will be subject to GST.
Comment:
Although there have been a number of small changes to personal taxation, importantly there have been no changes to marginal income tax rates or thresholds and no extension of the budget repair levy. In addition, pre-Budget speculation that a ‘deposit tax’ on savings held in a bank account would be introduced were not included in the Budget measures.
