1. Medicare low income thresholds
The Government will increase the Medicare levy low-income thresholds for singles, families and single seniors and pensioners from the 2014-15 income year, to take account of movements in the Consumer Price Index so that low-income taxpayers generally continue to be exempted from paying the Medicare levy. The threshold for singles will be increased to $20,896. For couples with no children, the threshold will be increased to $35,261 and the additional amount of threshold for each dependent child or student will be increased to $3,238. For single seniors and pensioners, the threshold will be increased to $33,044. This measure is estimated to have a cost to revenue of $231.0 million over the forward estimates period.
2. Work-related car expense deductions
The Government will modernise the methods of calculating work-related car expense deductions from the 2015-16 income year. The '12 per cent of original value method' and the 'one-third of actual expenses method', which are used by less than two per cent of those who claim work-related car expenses, will be removed. The 'cents per kilometre method', will be modernised by replacing the three current rates based on engine size with one rate set at 66 cents per kilometre to apply for all motor vehicles, with the Commissioner of Taxation responsible for updating the rate in following years. The 'logbook method' of calculating expenses will be retained.
3. Residency rules for temporary working holiday makers
Currently, a working holiday maker can be treated as a resident for tax purposes if they are in Australia for more than six months (unless it can be established that the person's usual place of abode is outside Australia and that there is no intention to take up residence in Australia). This means they are able to access the tax-free threshold, the low income tax offset and the lower tax rate of 19% for income above the tax-free threshold up to $37,000.
The government will change the tax residency rules from 1 July 2016 to treat most people who are temporarily in Australia for a working holiday as non-residents for tax purposes, regardless of how long they are here. This means they will be taxed at 32.5% from their first dollar of income (up to $80,000).
4. HELP repayments from overseas debtors
The government will extend the Higher Education Loan Programme ('HELP') repayment framework to debtors residing overseas for six months or more if their worldwide income exceeds the minimum repayment threshold at the same repayment rates as debtors in Australia.
The new arrangements will apply from 1 January 2016 to new and existing debts. From this date, debtors going overseas for more than six months will be required to register with the ATO, while those already overseas will have until 1 July 2017 to register. Repayment obligations will commence from 1 July 2017.
If you have any questions about how these measure may impact you, please contact the team at Goodwin Chivas & Co.