2013/14 Federal Budget and Taxation/Medicare Levy changes
Deferral of personal tax cuts
The Government will defer the personal income tax cuts scheduled to commence on 1 July 2015. There is no specific date to when the personal income tax cuts are to be deferred; however, the Government announced that the tax cuts will be deferred until the estimated price of carbon reaches $25.40 per tonne.
The current legislated personal income tax rates are detailed in the table below:
|
2012/13 |
From 1 July 2015 |
||
|
Threshold |
Rate |
Threshold |
Rate |
|
$18,201 |
19% |
$18,201 |
19% |
|
$37,001 |
32.5% |
$37,001 |
32.5% |
|
$80,001 |
37% |
$80,001 |
37% |
|
$180,001 |
45% |
$180,001 |
45% |
Increased Medicare levy
The Government will increase the Medicare levy by half a percentage point from 1.5 to 2% from 1 July 2014 to provide funding for DisabilityCare Australia.
The current exemptions from the Medicare levy will also remain in place. Additionally, low-income earners will continue to receive relief from the Medicare levy from the application of low-income thresholds that apply to singles, families, seniors and pensioners.
Note: This measure was previously announced on 1 May 2013 by the Prime Minister, the Treasurer and the Minister for Disability Reform. Draft legislation was released on 13 May 2013.
Medicare levy low-income threshold
The Government will increase the Medicare levy low-income threshold for families to $33,693 for the 2012/13 financial year, with effect from 1 July 2012.
The additional amount of threshold for each dependent child or student will also increase to $3,094.
The Medicare levy low-income thresholds increased to $20,542 for individuals and $32,279 for pensioners eligible for the seniors and pensioners tax offset.
The Medicare levy thresholds for the 2012/13 financial year are detailed in the following table:
|
Medicare levy thresholds Taxpayer income category |
No levy where taxable income is between |
Reduced levy where taxable income is between |
Full 1.5% levy where taxable income is greater than |
|
Eligible for senior Australian and pensioner tax offset |
|||
|
Single |
$0–$32,279 |
$32,280–$37,975 |
$37,975 |
|
Couple |
$0–$46,000 |
$46,001–$54,117 |
$54,117 |
|
Other Taxpayers |
|||
|
Single |
$0–$20,542 |
$20,543–$24,167 |
$24,167 |
|
Couple |
$0–$33,693 |
$33,694– $39,638 |
$39,638 |
** For dependent children or students add $3094 for each child.
Note 1: Parts of this announcement received Royal Assent on 4 December 2011 within the Clean Energy (Tax Laws Amendments) Act 2011.
Note 2: Amendments that have not yet been legislated were introduced into the House of Representatives on 15 May 2013 within the Tax Laws Amendment (Medicare Levy) Bill 2013.
Net medical expenses tax offset phase out
The Government will phase out the net medical expenses tax offset (NMETO) with transitional arrangements for those currently claiming the offset.
The NMETO will continue to be available for taxpayers for out-of-pocket medical expenses relating to disability aids, attendant care or aged care expenses until 1 July 2019 when DisabilityCare Australia is fully operational and aged care reforms have been in place for several years.
From 1 July 2013, those taxpayers who claimed the NMETO for the 2012/13 financial year will continue to be eligible for the NMETO for the 2013/14 financial year if they have eligible out-of-pocket medical expenses above the relevant thresholds.
Similarly, those who claim the NMETO in 2013/14 will continue to be eligible for the NMETO in 2014/15.
Note: Tax Laws Amendment (2012 Measure No. 6) Bill 2012 was introduced into the Senate on 19 March 2013 and this Bill makes amendments to the various thresholds for the NMETO.
Increased general threshold of the Medicare safety net
The Government will increase the Medicare safety net general threshold to $2,000 from 1 January 2015.
The general threshold, which is indexed by the CPI on 1 January each year, is currently $1,221.90. The concessional threshold of $610.70, which applies for Commonwealth concession cardholders and people who receive Family Tax Benefit (FTB) Part A, will not change under this measure.
The Medicare safety net provides an additional rebate for Australian families and singles who incur out-of-pocket costs for Medicare eligible out of hospital services.
Once the annual thresholds have been met in a calendar year, Medicare will pay the lower of 80% of any subsequent out-of-pocket costs or the benefit cap for out of hospital Medicare services for the remainder of that year.
Work related self-education expenses
From 1 July 2014 taxpayers will be able to claim a maximum tax deduction of $2000 for education expenses in a financial year.
Deductible education expenses are costs incurred in undertaking a course of study or other education activity, such as conferences and workshops, and include tuition fees, registration fees, student amenity fees, textbooks, professional and trade journals, travel and accommodation expenses, computer expenses and stationery, where these expenses are incurred in the production of the taxpayer’s current assessable income.
Under current rules, a taxpayer can generally claim an unlimited tax deduction where their self-education expenses exceed $250.
Employers are generally not liable for fringe benefits tax for education and training they provide or fund for their employees. This treatment will be retained unless an employee salary sacrifices to obtain these benefits.
This measure was announced by the Treasurer on 13 April 2013.
For an appointment, or a confidential discussion of your needs, please contact our Tax Accountants today, or call 1300 627 829.
