Now that we have commenced the new financial year we thought it timely to remind you of some of the key changes tax changes taking effect from 1 July 2012.
Instant Asset Write- Off and Depreciation Pool for Small Business
Eligible small businesses (annual turnover less than $2 million) will be able to write-off depreciating assets costing less than $6,500 in the income year in which they start to use the asset, or have it installed ready for use.
Small businesses will also be able to immediately deduct the first $5,000 of a new or used motor vehicle, purchased from 1 July this year.
Most other assets are able to be depreciated in a single pool at a rate of 30%.
Personal Income Tax Rates
The personal income tax rates and thresholds are summarised for resident taxpayers in the table below:
Personal income tax rates and thresholds
Threshold Rate $6,001
Threshold Rate $18,201
These rates exclude the 1.5% Medicare levy.
The various Medical expense rebates, offsets and surcharges are means tested from 1 July 2012 as follows:
Private Health Insurance Rebate
For singles earning more than $84,000 (more than $168,000 for couples and families) the private health insurance rebate phases out such that singles earning more than $130,000 (more than $260,000 for couples and families) no longer receive any rebate.
Medicare Levy Surcharge
The Medicare Levy Surcharge is now imposed on singles earning more than $84,000 (more than $168,000 for couples and families) who do not have private patient hospital insurance. The Surcharge is initially imposed at a rate of 1% increasing to 1.25% for singles with earnings of more than $97,000 (more than $194,000 for couples and families) and is increased again to 1.5% for singles earning $130,000 or more ($260,000 or more for couples and families).
Medical Expenses Tax Offset
Singles who earn more than $84,000 ($168,000 for couples and families) will also be subject to a reduced Medical Expenses Tax Offset. From 1 July 2012 only 10% of out of pocket medical expenses over $5,000 will be eligible for the offset. Singles earning less than $84,000 ($168,000 for couples and families) will continue to be eligible for an offset of 20% of their out of pocket medical expenses over $2,120.
Living Away From Home Allowance – Restricted
Changes to the eligibility criteria for the living away from home allowance (LAFHA) limit access to the tax concession to employees who:
1.maintain a home for their own use in Australia,
2.that they are living away from for work; and
3.provide the tax concession for a maximum period of 12 months in respect of an individual employee for any particular work location.
This will restrict the ability of employers to pay tax concessional benefits to employees recruited from overseas.
Superannuation Contributions Tax to Double to 30% for Incomes Above $300,000
Individuals with income greater than $300,000 will have the tax concession on their concessional contributions reduced from 30% to 15% (excluding the Medicare levy). This means that the tax rate on concessional contributions will effectively double from 15% to 30% for very high income earners from 1 July 2012.
Superannuation Concessional Contributions Cap – Limit $25,000
The proposed higher concessional contributions cap for individuals aged 50 and over with superannuation balances below $500,000 will be deferred from 1 July 2012 to 1 July 2014. Accordingly, all taxpayers, regardless of age, will be subject to a concessional contributions cap of $25,000 for the 2012-13 and 2013-14 income years. In 2014-15, the general cap is expected to increase to $30,000 through indexation, and the higher cap would then commence at $55,000 for eligible taxpayers aged 50 and over.
Loss ‘Carry Back’ Measure for Companies
Loss carry back rules take effect from 1 July 2012 which will allow only companies to:
– an initial one year carry back period from the 2012-13 income year (i.e. 2012-13 tax losses can be carried back and offset against tax paid in 2011-12);
– a two year loss carry back period to apply from the 2013-14 income year;
– a $1 million cap on the amount of losses able to be carried back, and
– refunds will be limited to the balance of a company’s franking account.
If you have any questions regarding these changes please contact Murray Howlett of our Taxation Services Division on (07) 3023 1300.