Chapter 3: Taxation planning // Taxation planning // Financial Planning 2013/14 Update E...

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Chapter 3: Taxation planning

Details of new tax rates and thresholds effective from 1 July 2013
Individual tax rates (pages 9293)

From 1 July 2012, under the governments Household Assistance Package, changes applied to the
marginal tax rates applying to individual tax payers. The tax-free threshold increased from $6000 to
$18 200. Tax rates effective for the 2013/14 financial year are displayed in the following table.
Taxable income Marginal tax rate
Tax payable (4)
$0$18 200
0%
Nil
$18 201$37 000 19%
$0 + 19% on the excess over $18 200
$37 001$80 000 32.5%
$3 572 + 32.5% on the excess over $37 000
$80 001$180 000 37%
$17 547 + 37% on the excess over $80 000
$180 001 +
45%
$54 547 + 45% on the excess over $180 000
Source: Australian Taxation Office, 2013
Tax rates payable by other entities

Companies (page 93)

The government proposal to reduce the tax rates payable by companies from 30% to 29% was
abandoned in the 2012/13 Federal Budget and will not proceed for the time being. The taxes rates
payable by all companies remains at a flat rate of 30%.
The low income tax offset (page 94)

As part of the tax reforms associated with the Household Assistance Package, effective from 1
July 2012, the low income tax offset threshold increased from $30 000 to $37 000 and cut out
completely at a taxable income of $66 667. For the 2013/14 financial year the maximum offset is $445.
For taxable income levels above $37 000, the maximum tax offset will be reduced by 1.5 cents in the
dollar.
The following table provides income thresholds for the 2013/14 financial year.
Taxable income
Tax offset
$37 000 or less $445
$37 000$66 667 $445 [(Income $37 000) 1.5%]
$66 667 +
Nil
Source: Australian Taxation Office, 2013
Thus while marginal tax rates will fall effective 1 July 2012, taxpayers will be eligible for a reduced
entitlement to the low income tax offset.
From 1 July 2011 minors (children under 18 years of age) can no longer access the low income tax
offset to reduce tax payable on most unearned income (for example, interest and rent).
Medicare levy (page 95)

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The medicare levy is proposed to increase from 1 July 2014 from 1.5% to 2% of taxable income to
fund the Governments national disability insurance scheme Disability Care.
Medicare levy surcharge (page 95)

For the 2013/14 financial year the medicare levy surcharge will be income tested against the thresholds
detailed in the following table
Taxable income thresholds
Unchanged
Tier 1
Tier 2
Tier 3
Singles $84 000 or less $84 001$97 000 $97 001$130 000 $130 001 +
Families $168 000 or less $168 001$194 000 $194 001$260 000 $260 001 +
Rate
0%
1.0%
1.25%
1.5%
Source: Australian Taxation Office, 2013
The medicare levy surcharge will still continue to apply only if the taxpayer does not have an
appropriate level of private patient hospital cover.
Illustrative Example 3.2 re-worked (pages 9596)

Assessable income
Salary
$75 000
Bank interest
1 500
Total assessable income
76 500
Less allowable deductions
Travelling costs incurred for work purposes
1 000
Membership of the Australian Journalists Association 800
Donation to hospital
200
Tax agents costs (preparation of tax return)
600
Total allowable deductions
2 600
Taxable income
73 900
Gross tax payable
15 564.50
($3 572 + 32.5% of the excess over $37 000)
Add Medicare levy (1.5%)
1 108.50
Net tax payable
16 673.00
Impact of income tax on investment income

Interest (page 97)

In the 2012/13 Federal Budget, the government announced that the 50% interest discount on interest
earned by individuals will not proceed.
Tax structures

Companies (pages 111112)

Companies are able to carry forward losses to reduce tax payable on future income. Effective from 1
July 2012, it is proposed that companies can carry-back tax losses and generate a tax refund against tax
that had been previously paid by the company. Tax losses incurred in 2012/13 will be able to be carried
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back one year and offset against tax paid during the 2011/12 financial year. It is proposed that tax
losses incurred during the 2013/14 and later financial years will be able to be carried back and offset
against tax paid in the two previous financial years.
Loss carry-back will:

be available to companies and entities taxed like companies who elect to carry-back losses
be capped at $1 million of losses per year
apply to revenue losses only
be limited to the companys franking account balance.

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