By Paul Trimble, Director, Westlawn Business Services
Your quick guide to tax rates and benefits for the 2013-14 financial year provides a handy overview of the tax rates for residents, non-residents and children as well as some of the benefits and tax offsets you and your family may be entitled to receive over the coming financial year.
Personal tax rates & Medicare levy
Firstly, let’s look at personal tax rates for residents, non-residents and children. These rates are scheduled to remain until the 2017-18 financial year.
Personal income tax rates for residents
For 2013-14, the Medicare levy payable by residents remains at 1.5% but will increase to 2% from 1 July 2014. This increase is to fund the national disability insurance scheme, DisabilityCare Australia.
Low-income earners, however, receive relief from the Medicare levy through the low income thresholds.
For families, the Medicare levy low-income threshold is $33,693, increasing by an additional $3,094 for each dependent child or student.
For individuals, the low-income threshold is $20,542. And for pensioners eligible for the Seniors and Pensioners Tax Offset, the threshold is $32,279.
For non-residents, the personal tax rates are below. Non-residents are not entitled to a tax-free threshold and are not required to pay the Medicare levy.
Personal income tax rates for non-residents
up to $80,000
The unearned income of children under 18 years of age, called eligible taxable income, is subject to special tax rates (with certain exceptions). The Medicare levy may also be payable.
Full year tax rates for children
Eligible taxable income
$0 – $416
$417 – $1,307
Minors are also entitled to the ‘low income’ tax rebate of $1,200. This means they effectively receive $1,667 tax-free. Where a minor receives both excepted income and eligible taxable income, the calculation is subject to other special rules.
Investments (including savings accounts and shares) in the name of dependent children under the age of 16 are subject to special income tax rules. If the child’s tax file number is not supplied to the investment body, they must withhold tax at 46% of interest earnings.
Earnings from a child’s investments must be declared by the person who rightfully owns and controls the investment.
Tax benefits for families
Australia’s tax system offers a range of tax benefits including credits, refunds and offsets to support families. To be eligible for any of these benefits you’ll need a tax file number, as will your spouse and children with income, superannuation or investments.
Your spouse includes another person (whether of the same sex or opposite sex) who:
you were in a relationship with that was registered under a prescribed state or territory law or
you lived with on a genuine domestic basis in a relationship as a couple although not legally married.
Income tax offsets
Depending on your circumstances, you may be eligible for one or more tax offsets (formerly known as rebates) such as:
Dependent spouse (without dependent child or student)
Child-housekeeper or housekeeper
Parent, spouse’s parent or invalid relative
Private health insurance
Net medical expenses
Government benefits (eg government pensions or Centrelink payments)
Low income (such as part time participation in the workforce)
The tax system has provisions to help ease the financial burden of separating families. These provisions apply to capital gains tax, super and income from child and partner support payments. In addition to claiming allowable deductions, tax offsets may also be available.
Mature age worker offset
This offset is available to individuals aged 55 or over who have “net income from working”. However, this offset is being phased out for taxpayers born on or after 1 July 1957.
For work related self-education expenses, you can claim a deduction when your course of study is directly connected to your current employment by either:
Maintaining or improving the specific skills or knowledge you require, or
Resulting in, or being likely to result in, an increase in your income.
You can also claim a deduction for study expenses if you receive a taxable bonded scholarship and doing the course satisfies study requirements to maintain your right to the scholarship.
You can claim a deduction for expenses such as travel, computers and some course fees.
An annual $2,000 cap on work-related self-education expenses is scheduled to begin 1 July 2014.
You may be eligible for the beneficiary tax offset if you receive certain government allowances and payments. Generally, you pay no tax if your only income is a qualifying benefit or allowance. If you don’t receive the full amount of any qualifying benefits and allowances, or have other taxable income, you may still be eligible for a partial offset.
The private health insurance offset is a percentage of the premium you pay to a registered health insurer for a complying private health insurance policy.
You can claim a tax offset of 20% of your net medical expenses for the year over a certain level. The offset is subject to a means test. Net medical expenses are the eligible medical expenses you’ve paid, less any available refunds from Medicare or a private health insurer.
Zones and overseas forces
If you live or work in remote or isolated areas of Australia or serve in forces overseas, you may be eligible for an offset.
Disclaimer Westlawn provides this information for general guidance only, and does not constitute the provision of legal advice, tax advice, accounting services, investment advice, or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal, or other competent advisers.
Before making any decision or taking any action, you should consult a professional adviser who has been provided with all pertinent facts relevant to your particular situation. Tax articles are not intended to be used, and cannot be used by any taxpayer, for the purpose of avoiding accuracy-related penalties that may be imposed on the taxpayer. The information is provided “as is,” with no assurance or guarantee of completeness, accuracy, or timeliness of the information, and without warranty of any kind, express or implied, including but not limited to warranties of performance, merchantability, and fitness for a particular purpose.