Income Tax Changes – Individuals (2013 General Taxation Strategies)

 

Tax-Free Threshold and Tax Rates

The tax-free threshold for 2012/13 for Australian resident individuals is $18,200 (up from $6,000). When combined with the Low Income Tax Offset, residents pay no tax on incomes below $20,542.

Higher thresholds apply to senior Australians and pensioners. For incomes above the thresholds, tax rates are slightly lower.

Non-resident individuals for the whole of 2012-13 do not get a tax-free threshold. Part-year residents get a partial threshold which is more generous than in previous years.

Means Testing of Private Health Insurance Rebate & Medicare Levy Surcharge

Tiered rates of private health insurance rebates now apply, based on your age and income.

If you claim the rebate as a premium reduction you are (or were) required to nominate your rate when renewing your policy. If you quoted the wrong rate, you will have an amount payable or refundable on your 2012-13 tax assessment.

If you don’t hold private health insurance, tiered rates of Medicare levy surcharge apply based on your income.

Multiple Changes to Personal Tax Offsets

A major restructure of personal tax offsets takes effect in 2012/13. If you have previously benefited from any of the following, you may have an increased tax liability for 2012/13:

• Net Medical Expenses Tax Offset – for incomes above $84,000 (singles) or $168,000 (couples and families), the offset is 10% of out-of-pocket expenses (down from 20%) and the threshold is now $5,000.
• The Mature Age Worker Tax Offset is now restricted to taxpayers born before 1 July 1957, there is no change if you were already eligible for the tax offset in the 2011-12 or earlier years.
• The Spouse Tax Offset is now limited to spouses born before 1 July 1952 (previously 1 July 1971).
• A new income test applies to the Employment Termination Payments Tax Offset

Superannuation

Low income earners (adjusted taxable income below $37,000) may benefit from the Low Income Super Contribution (LISC) – a government superannuation payment equal to 15% of deductible contributions made by you or your employer, up to a maximum of $500. The LISC is additional to the existing super co-contribution. The co-contribution is now 50% of personal non-deductible contributions, up to a maximum of $500. The maximum eligible income has been reduced.

High income earners (adjusted taxable income above $300,000) will have the tax concession on contributions reduced from 30% to 15%. The government is still deciding whether the additional 15% tax will be collected from the individual or the superannuation fund.

If you have inadvertently made super contributions in excess of the maximum deductible amount (generally $25,000), you may be able to take the excess back out of your super fund. Multiple conditions apply, this should not be considered without advice.

The minimum pension payment for account based pensions in 2012-13 is again reduced by 25%.

Dad and Partner Day

Dad & Partner Pay (DAPP) complements the Paid Parental Leave scheme. It is a direct payment through Centrelink to eligible fathers and partners providing care for children born or adopted after 1 January 2013. Eligible fathers and partners can claim up to two weeks DAPP at the national minimum wage.

Removal of Capital Gains Discount for Non-Residents

The government will remove eligibility for the 50% discount on capital gains earned after 8 May 2012 by non-resident individuals and trusts on taxable Australian property, such as real estate and mining assets. You can preserve the discount for unrealised capital gains accrued up to 8 May 2012, if you have the asset valued as at that time.