ATO Tax Rates 2012-2013 Year (Residents)

The following adjusted tax scale was announced by Prime Minister Julia Gillard on 10 July 2011 as part of the “Clean Energy” carbon tax and pricing package.

Full details of the personal tax adjustments can be reviewed here.

The adjusted basic tax scale for 2012-2013 is as follows:

Taxable income Tax on this income*
0 – $18,200 Nil
$18,201 – $37,000 19c for each $1 over $18,200
$37,001 – $80,000 $3,572 plus 32.5c for each $1 over $37,000
$80,001 – $180,000 $17,547 plus 37c for each $1 over $80,000
$180,001 and over $54,547 plus 45c for each $1 over $180,000

*Plus Medicare Levy as applicable.
The above rates don’t include Medicare Levy, which is applied on a progressive basis at the additional rate of 1.5%, or 2.5% if eligible private health insurance cover is not maintained. There are low income and other full or partial exemptions available. More here.

Note that along with the increase in “nil tax” threshold to $18,200, the Low Income Tax Offset “LITO” has been reduced to $445. The new LITO calculation is here. The combined effect is that no tax is payable up to an income of $20,542.

2015/2016 Budget Update

The most important figure, that you may well have missed because Mr Swan as Julia Gillard calls him, didn’t actually mention it in his speech, was that the deficit will be $18 billion with a forecast return to surplus in 2016/2017. Nevertheless, we are way ahead of our peers.

The following are details from the budget on areas most likely to be of interest to our readers. Of course the details in the budget paper are one thing. What the final legislation says is another. Even if you have heard the budget speech or read the papers, please still read this article all the way through because there are items that were not included in the speech or receive any publicity, such as the reduction of the time to claim family and child care payments. A little cash grab that they would rather sneak up on you.

Fortunately, all of the tightening of taxation policy in regard to businesses was directed at the big end of town, particularly multinationals.

For individuals and families the points that are most likely to interest you are:

The 2015/2016 tax cuts will not happen, they were only minor amounts. For example in 2015/16 under the old regime you could have earned $20,979 and paid no tax. Instead now that will remain at $20,542. The tax free threshold will also remain at $18,200 instead of moving to $19,400. Note that in the 2015/2016 financial year the tax rate for the $37,001 to $80,000 tax bracket will increase by half a per cent to 33%.

Medicare Levy – As previously announced the Medicare Levy will increase from 1.5% to 2% to cover the National Disability Scheme.

Medical Expenses Tax Offset – It is intended to eventually phase this out completely. For the 2012-13 financial year, providing your income as an individual is under $84,000 or $168,000 for families (add an extra $1,500 for each child after the first) you would be able to claim 20% of unreimbursed medical expenses exceeding $2,120. But if your income exceeds these thresholds then you will only be entitled to claim 10% and then only if you’re medical expenses exceed $5,000.

Now the changes in this budget are firstly that if you don’t qualify for the Medical expenses tax offset in the 2012/13 financial year, that is it, you are out of the pool, and can never qualify in the future. But if you did qualify in 2013 you can continue to qualify up until and including the 2014/15 financial year providing each time you have qualified in the previous year.

Separate from all this is medical expenses relating to disability aids, disability care and aged care. These expenses will always qualify for the medical expenses tax offset up until and including the 2018/2019 financial year, providing they exceed the threshold.

Payments for Newborns – The Baby Bonus will be removed for babies born after 1st March 2014. In its place an additional $2,000 will be paid in Family Tax Benefit Part A after the birth or adoption of a family’s first child. In the case of multiple births $2,000 will be received for each child even when it is not the first child for the family. $500 will be received up front the balance over the next 7 fortnights. Only $1,000 will be received if it is a single birth and the family’s second and subsequent children. Should be interesting to see how they define family. Of course if the family does not qualify for Part A they will not qualify for this payment either. Part A tends to cut out at around $113,000 in family income a year. It varies depending on the number and age of the children. As was the case with the baby bonus this payment cannot apply if the Paid Parental Leave scheme is utilised.

Losing Family and Childcare Payments – Not much publicity for this one, basically it is a bit of trickery to try and save some money on family payments. For the 2012/2013 financial year and all future years families will only have 12 months after the end of the financial year to lodge their tax returns and claim lump sum payments. Miss the deadline and the entitlement will be lost. Previously families had 2 years.

Self-Education Expenses – From next financial year 2013/14 the maximum deduction you can claim for self-education expenses will be limited to $2,000. It will be interesting to see how this threshold is avoided.

It will now be better to class any expenses you can, as simply work related expenses so a clear definition will be needed. For example members of professional organisations may include an educational component such as a magazine. Will their membership fee contribute wholly or in part to the $2,000 threshold?

Another option is for employers to pay for the expenses as the government has said it won’t affect training and education provided by employers, that will continue to remain exempt from FBT providing the expenses have not been agreed to as part of a salary sacrifice arrangement.

Property Investors and Home Purchasers – Starting on the 1st July 2016 purchasers of properties from non-residents will be required to withhold 10% of the purchase price and remit it to the government. So it is important that before you purchase a property you make sure that the seller is a resident of Australia for tax purposes. Take care, if you get it wrong you will be up for another 10% of the purchase price. The seller could be right here in front of you with an Australian passport and still not be considered a resident of Australia for tax purposes. This will apply to all commercial property transactions but it will only apply to residential property transactions exceeding $2.5million. The seller can claim the 10% back from the ATO when they lodge their tax return.

Data Matching – Funds in the budget have been allocated to increasing the data matching that the ATO collects, to include, government grants, sales of property, shares and units in managed funds. They will also have access to data on sales through merchant services i.e. Managed investment fund distributions, partnership distributions, company dividends and interest payments.

Superannuation – As already announced from 1st July, 2012 taxpayers with an adjustable taxable income in excess of $300,000 will have their superannuation contributions taxed at 30% instead of 15%

Trusts – The ATO has received extra funding to attack trusts used to “conceal income, mischaracterise transactions, artificially reduce trust income amounts and under pay tax”. Further work will be done on reconciling taxable trust income to ordinary trust income, hopefully giving a bit more clarity. One thing is for sure Hybrid Trusts will be under even more scrutiny with threats being made to prosecute promoters of such arrangements.

Farm Management Deposits – From the 1st July, 2014 farmers can have additional income from non primary production up to $100,000 (up from $65,000) and still be entitled to a tax deduction for any funds they place in a farm management deposit for use in future years.