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April tax roundup: What you need to know

By Justin Inskip, Director, Westlawn Business Services
28 April 2015

This tax roundup for April 2015 provides an update of what you need to know in relation to both individual tax and business tax. It includes information on the Medicare Levy Surcharge and Private Health Insurance Rebate,  ‘partnership salary’ agreements and the tax obligations for closing down or selling a business. Also included are some recent updates from the ATO.

Medicare Levy Surcharge & Private Health Insurance Rebate

Income thresholds

Legislation was passed in October 2014 to pause for 3 years the income thresholds which determine the tiers for the Medicare levy surcharge and government rebate on private health insurance from the 2015-16 financial year. Usually, the income amounts would be increased by an indexed amount, but this is not going to happen for the next 3 years. The tables below set out the income levels for singles and families and confirm the income amounts will remain the same from the 2015 to the 2018 income years:

Singles

Income yearBase tierTier 1Tier 2Tier 3
2013-14$88,000 or less$88,001 – $102,000$102,001 – $136,000$136,001 or more
2014-15$90,000 or less$90,001 – $105,000$105,001 – $140,000$140,001 or more
2015-16$90,000 or less$90,001 – $105,000$105,001 – $140,000$140,001 or more
2016-17$90,000 or less$90,001 – $105,000$105,001 – $140,000$140,001 or more
2017-18$90,000 or less$90,001 – $105,000$105,001 – $140,000$140,001 or more

Family

Income yearBase tierTier 1Tier 2Tier 3
2013-14$176,000 or less$176,001 – $204,000$204,001 – $272,000$272,001 or more
2014-15$180,000 or less$180,001 – $210,000$210,001 – $280,000$280,001 or more
2015-16$180,000 or less$180,001 – $210,000$210,001 – $280,000$280,001 or more
2016-17$180,000 or less$180,001 – $210,000$210,001 – $280,000$280,001 or more
2017-18$180,000 or less$180,001 – $210,000$210,001 – $280,000$280,001 or more

It is anticipated indexation to increase the income amounts will begin again from the 2018-19 income year.

Private health insurance rebate percentage

From 1 April each year, the private health insurance rebate percentages for premiums paid will be subject to an annual adjustment. The rebate adjustment factor is based on a formula that uses the Consumer Price Index and the average annual increase in premiums. The first annual adjustment occurred on 1 April 2014.

This means there will be 2 different rebates to enter in your tax return for each tax year:

    • From 1 July 2014 to 31 March 2015, and
    • From 1 April 2015 to 30 June 2015.

These different rebates appear on your private health insurance statement as 2 separate lines. Both must be entered on your tax return.

The rebate amount for the period 1 July 2014 to 31 March 2015 is:

Age rangeBase tierTier 1Tier 2Tier 3
Under 65 years29.04%19.36%9.68%0%
65 – 69 years33.88%24.20%14.52%0%
70 years and over38.72%29.04%19.36%0%

The rebate amount for the period 1 April 2015 to 30 June 2015 is:

Age rangeBase tierTier 1Tier 2Tier 3
Under 65 years27.820%18.547%9.273%0%
65 – 69 years32.457%23.184%13.910%0%
70 years and over37.094%27.820%18.547%0%

Please note: These figures became available 9 April 2015.

Private health insurance rebate – reversal of amendments

The ATO has advised that it regularly matches data with health insurers to identify taxpayers who received the private health insurance (PHI) rebate through reduced premiums and have also claimed them in their income tax return. When this double claim occurs, the ATO automatically amends the taxpayer’s assessment to remove the rebate.

The ATO has reviewed amendments to reverse double claims for the PHI rebate and has identified some that have been made outside the taxpayer’s period of review.

The ATO says that in limited circumstances an assessment may be amended at any time to give effect to the provisions that relate to the PHI rebate.

The ATO has advised that if there are taxpayers affected, the ATO will write to the taxpayer’s registered contact (this could be your tax agent) about this decision and tell them a notice of amended assessment will issue soon. If you have been affected by this, you may have already received a notice of amended assessment, in which case, you should talk to your tax agent about it.

Medicare Levy Surcharge amounts

The following Medicare Levy surcharge amounts apply for the 2014-15 Income Year depending on which income tier you fall into (refer to the income tables above):

Income tierBase tierTier 1Tier 2Tier 3
Surcharge amount0%1%1.25%1.5%

What to do
Completing your private health insurance rebate information in your tax return has become a little tricky with the introduction of an annual adjustment on 1 April for the private health insurance rebate percentages as now you have double the information to include in your return. See your Westlawn Business Services Accountant for help completing this part of the return.

Net Medical Expenses Tax Offset

The phase-out of Net Medical Expenses Tax Offset (NMETO) began on 1 July 2013. To be eligible to claim the NMETO in the 2014-15 income year, you need to have been able to claim the offset and received it in your 2013-14 return. The NMETO is no longer available after 30 June 2015 unless the medical expenses you are claiming relate to specific medical items, such as disability aids, attendant care or aged care. However, only these expenses will be able to be claimed up to the 2018-19 income year.

Are you in a partnership?

In November last year, the ATO issued an addendum to Taxation Ruling TR 2005/7:

    • TR 2005/7A1 – Income tax: the taxation implications of ‘partnership salary’ agreements

The addendum amends the ruling to include the taxation consequences of a partner’s salary where the partnership is a corporate limited partnership.

As a result, ATO ID 2002/564 (Income Tax Partner Salary in A Corporate Limited Partnership) has been withdrawn.

If you are in a partnership, this change might affect you. If in doubt, contact your Westlawn Business Services Accountant.

Do you own a rental property?

The ATO has advised that it has made clearer the letters it is sending to agents and taxpayers regarding reviews of rental legal and/or borrowing expense claims. In feedback, the ATO was asked to provide information on the specific area of the expense claims it is reviewing. The re-drafted letters now identify:

    • Return label and amounts in question
    • The proposed adjustments
    • What to do in the event of a disagreement; and
    • Where to find relevant information on ato.gov.au about what can be claimed, including QR reader codes to scan for smartphones or tablets.

If you have a rental property and receive one of these letters, contact your Westlawn Business Services Accountant.

Selling or closing down a business

If selling or closing down a business, there are some important tax obligations for the business that you should attend to, such as:

    • Ensuring all outstanding Activity Statements and returns (income tax, FBT) have been lodged
    • Requesting any refunds owed to your business
    • Cancelling any PAYG withholding registrations for the business; and
    • Cancelling the business’ ABN (which should also result in the cancellation of other registrations such as GST).

For more information, read Selling or closing down a business on the ATO website.

Other ATO updates

Are you a director of a company?
The ATO has a new webpage, Director penalty regime – guide for directors, with information about the director penalty regime, which is all about what happens when a company deducts PAYG withholding amounts from its employees’ salaries and wages, but fails to remit those amounts to the ATO.

Deductibility of working with children checks
The ATO advises that the requirement for people to obtain a Working with Children check will be introduced in NSW and exists in many other states.

For information about when the cost of a Working with Children check is deductible, read the ATO’s Working with Children check.

The Privacy Commissioner and TFN privacy rule
The Privacy Commissioner has issued a new privacy rule under the privacy law about Tax File Numbers, to replace the previous Tax File Number Guidelines 2011. The new rule is the Privacy (Tax File Number) Rule 2015 (Legislative Instrument F2015L00249; registered 4 March 2015).

The primary purpose of the rule is to regulate the collection, storage, use, disclosure, security and disposal of individuals’ Tax File Number (TFN) information. A breach of the rule is an interference with privacy under the Privacy Act. Individuals who consider that their TFN information has been mishandled may make a complaint to the Privacy Commissioner.

The rule explicitly authorises the use and disclosure of TFN information by a TFN recipient (such as the Commissioner of Taxation and the trustees of a superannuation fund) for the purpose of giving an individual any TFN information that the TFN recipient holds about an individual. This ensures that the TFN Rule does not prevent an individual being given access to his or her information under Australian Privacy Principle 12 of the Privacy Act, or another Act that provides for access by persons to documents.

If you have questions about any of the above, contact your Westlawn Business Services Accountant.

Copyright © 2015

Disclaimer

Westlawn Business Services Pty Ltd 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.