On 14 May 2013, Treasurer Wayne Swan delivered his sixth annual budget.
Below, we cover 5 of the outcomes that are most likely to impact on individual tax payers:
1. Income Tax Rates
Income tax rates will remain unchanged. Importantly though, plans to increase the tax free threshold from the current $18,200 to $19,400 in 2015 have been scrapped.
At this stage, the rates for 2013/14 are set to stay in place until at least 2017/18.
Tax Rates for Non Residents:
From next year (2013/14), non-Australian residents will pay a flat tax rate of 32.5% of their taxable income up to $80,000. From there the tax rates will be same as resident Australians.
2. Medicare Levy
From 1 July 2014 the compulsory Medicare Levy will be increased from 1.5% to 2% to help fund the introduction of the National Disability Insurance Scheme.
3. Net Medical Expenses Tax Offset
The net medical expenses tax offset will be phased out starting from 1 July 2013.
During the phase out period, it will also become more difficult to claim the offset. Only if you claim the offset in your 2012/13 tax return, can you then claim it again in 2013/14. Taxpayers who then claim it in 2013/14 can claim it again in 2014/15.
So, if you are not eligible or choose not to claim the offset in 2012-2013, you will not be able to claim the offset in future years.
4. Work Related Self-Education Expenses
From 1 July 2014 the amount of self education expenses you can claim under item D4 in your tax return will be limited to a maximum deduction of $2,000. Previously there has been no limit in place on these deductions.
5. Baby Bonus
The current $5,000 baby bonus will be abolished from 1 March 2014. Instead – families who are eligible for Family Tax Benefit A will receive $2000 following the birth of their first child and $1000 for each subsequent child.
Are you missing out on the chance to make more of your money and minimise your tax? There are many changes happening all the time within accounting, taxation and superannuation. Generally they result from a legislative change from our politicians or case law where the courts make an interpretation of the law as written. Sometimes it can be where the best opportunities lie.
In 2013 again there are a number of changes on the way with numerous reviews being completed the existing taxation laws and bills introduced to Parliament. Whether we agree or disagree with the reasons and the changes that result from political aspirations and requirements, not keeping abreast of these changes can cost you money.
Below are just a couple of the upcoming changes that may impact on your taxation & wealth planning.
• From 1 July, 2013 the maximum tax deductible superannuation contribution permitted annually will be $25,000 but extended to $35,000 if you are over 60 years old. From 1 July, 2014 this $35,000 will apply if you are over 50 years of age.
• It was proposed that from 1 July, 2013 off market transfers to a Self Managed Superannuation Fund would not be permitted. In late May this was proposal was abolished and the status quo prevails. If you currently hold any ASX listed shares in your own name or a related entity you can transfer them to your SMSF without having to sell and repurchase the shares – this may present a great opportunity to effectively plan for retirement and protect your assets in a tax effective manner.
• The Government has proposed changes to tax free income within superannuation on retirement – however, under the proposal, each individual can still earn up to $100,000 annually from funds invested via a superannuation fund tax free. The trick will be to ensure that you effectively manage your contributions to maximise this benefit within a family group.
Quite often when a change takes place there will be some form or honeymoon period or transitional phase and it is often in these times that we have the greatest opportunity to plan. Other times the change is effective immediately and we must make do.
If you would like to discuss the opportunities available to your specific circumstances feel free to contact our office for a financial health check. It’s often just a matter of asking what is available and you can have immediate results.