Tax changes from 1 July: What you need to know

Justin_headshot_etched_webBy Justin Inskip, Director, Westlawn Business Services
23 July 2014

It’s the start of a new financial year, and there’s a raft of tax changes taking effect from 1 July 2014. While the contentious carbon tax was finally repealed on 17 July after much political to-ing and fro-ing, the Government’s plans to abolish the Minerals Resource Rent Tax (MRRT), and the $10 billion in spending linked to it, have so far been thwarted in the Senate – which is now in recess until 26 August.

With many budget proposals still up in the air, here’s a summary of tax changes that will take effect from 1 July.

For individuals

Medicare Levy increase

The Medicare levy will increase by 0.5% to 2% pa of taxable income from 1 July 2014 to help fund the National Disability Insurance Scheme.

Temporary Budget Repair Levy

For high income earners, the Temporary Budget Repair Levy is payable at the rate of 2% of each dollar of an individual’s annual taxable income over $180,000.

The levy applies for the next 3 financial years, starting on 1 July 2014 and ending on 30 June 2017. This means the top marginal tax rate is effectively 49% (including the 2% Temporary Budget Repair Levy plus the 2% Medicare levy).

A number of other taxes are also affected by the levy. The fringe benefits tax (FBT) rate will increase from 47% to 49%. As the FBT year commences on 1 April and concludes on 31 March, the increase in the FBT rate will apply from 1 April 2015. The temporary increase in the FBT rate will end on 31 March 2017.

If you’re affected by the levy, you may want to review salary sacrificing arrangements and the possible effect of the levy. Contact your Westlawn Business Services Accountant for assistance.

Changes to private health insurance rebate

From 1 April 2014, private health insurance rebate percentages are subject to an annual adjustment. This means there will be 2 different rebates for the 2013–14 tax year and future years:

    • One from 1 July to 31 March, and
    • One from 1 April to 30 June.

These different rebates will appear separately on your private health insurance statement. You need to enter both on your tax return.

The rebate is no longer payable on any lifetime health cover loading. This means the amount of rebate you’re eligible to receive may be less this year. These changes will automatically be applied to your policy by your health insurer.

Low income earners with taxable income under the tax-free threshold may still need to lodge a tax return if they haven’t claimed their private health insurance rebate as a premium reduction.

Net medical expenses tax offset changes

The net medical expenses tax offset is being phased out.

To be eligible for the offset in 2013-14, you need to have received the offset in your 2012-13 income tax assessment. Similarly, to claim the offset in 2014-15, you need to have received the offset in 2013-14.

The final year you can claim will be 2014-15.

This doesn’t apply to those with medical expenses relating to disability aids, attendant care and aged care who can claim these related medical expenses until 30 June 2019.

Find out more on the ATO website.

Tax receipt

The Government will issue a receipt with each Individual taxpayer’s assessment notice detailing how much of their tax paid was spent on each budget area.

For business

Super guarantee increase

Superannuation guarantee contributions (SGC) increase 0.25% to 9.5% of ordinary time earnings in the 2014–15 financial year. There’ll be no further increases until 1 July 2019 when annual 0.5% increases will take the SGC to 12% in 2022–23.

PAYG instalment threshold changes

The pay as you go (PAYG) instalment system is a means of paying instalments towards your expected income tax liability on your business or investment income (or both) for the current income year.

The ATO has advised that PAYG instalment thresholds will change from 1 July 2014:

    • Business or investment income threshold increase from $2,000 to $4,000
    • Balance of assessment threshold increase from $500 to $1,000
    • Notional tax threshold increase from $250 to $500; and
    • Removal of requirement for entities registered for GST to remain in the system even if they have a zero instalment rate.

Many taxpayers will no longer have to pay PAYG instalments. In fact, the Minister for Small Business says around 32,500 small businesses that have no GST reporting requirements will no longer have to lodge a business activity statement (BAS) where to date lodgements have been made only to report PAYG instalments.

In addition, around 340,000 small businesses with modest or negative income which are required to lodge a BAS, will no longer have to interact with the PAYG instalment system.

Amendments to Farm Management Deposits

The Government announced the Farm Finance package of measures on 27 April 2013, in a joint media release by the Treasurer and the Minister for Agriculture, Fisheries and Forestry.

These changes are now law and include:

    • Allowing FMD owners to consolidate accounts they’ve held for longer than 12 months, without triggering tax liabilities
    • Increasing the taxable non-primary production income threshold for FMDs from $65,000 to $100,000.

These changes apply to income years commencing on or after 1 July 2014.

Farm Management Deposits have also been excluded from the operation of the unclaimed moneys scheme with effect from 30 May 2014.

Fuel schemes

Fuel schemes provide credits and grants to reduce the costs of some fuels or to provide a benefit to encourage the recycling of waste oils.

Fuel tax credit rates have changed. You can view the new rates here.

From 1 July 2014:

    • The carbon charge has now been removed from the fuel tax credit rates for fuel acquired from 1 July 2014.
    •  For fuel you acquire for your business, you can:
      • claim more for many off-road activities
      • no longer claim fuel tax credits for non-transport gaseous fuels used in agriculture, fishing and forestry activities.
    • You can now also claim more for transport gaseous fuels.

The Government is proposing to index excise duty rates for most fuels every 6 months from 1 August 2014.

Find out more on the ATO website.

Contact us today

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Copyright © 2014

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.