This article aims to give you a quick update on Budget 2015 changes and some tax tips for tax time 2015.

NEWSPOINT

 Tax Rates 
 Taxable Income Tax Rates 2014-15 Tax Rates 2015-16
 0 - $18,2000 Nil  Nil 
 $18, 201 - $37, 000           19%  # 19%  #
 $37, 001 - $80, 000 32.5%  # 32.5%  #
 $80, 001 - $180, 000 37%   37%  
 $180,001 and over  47% * 47% * 
  * Includes 2% temporary budget levy applicable for 3 years from 1st July 2014.
  # Low Income Tax Offset ("LITO") of $445 applies for taxable income up till $37,000, reducing by 1.5 cents in the dollar, for every dollar of taxable income over $37,000 such that it cuts out at $66,667. The effect is that no tax is payable up to an income of $20,892.

Medicare levy low income thresholds 2014-15
Basic Medicare levy of 2% applies to taxpayers earning above threshold as per below.
Type  Income Threshold for 2014-15
Individuals             $20, 896
Families  $35, 261

BUDGET UPDATE 2015 - FOR INDIVIDUAL TAXPAYERS

Work related car expenses
From 1 July 2015, taxpayers will only have two methods available to calculate and claim their work-related car expenses – the (max 5000kms) cents per kilometre method and log book method. 

Changes to the cents per kilometre method 
The Government will remove the sliding scale and replace it with a flat rate of 66 cents per kilometre for all claims regardless of the engine size or type. 
 Ordinary Engine Capacity     FY 2014-15 FY 2015-16
1600 cc or less   65 cents/km  66 cents/km
1601 to 2600 cc  76 cents/km  66 cents/km
 Over 2600 cc  77 cents/km   66 cents/km

 Tip! Most high end car claimers, claiming 12% of cost price or 1/3rd of actual cost method will loose out. Further, taxpayers using cents per killometer method will also loose out with reduced claim rate! Remember, to substantiate your car claim, you need to;
  • Maintain a 13 week logbook every 4 years and maintain all expense receipts (for Log Book Method)
  • Maintain a diary for 4 weeks each year. You don't need to keep actual expense receipts. (for Cents per kilometre method)

Changes to residency rules for temporary working holiday makers
Currently, a person working on temporary working holiday visa in Australia may be treated as a resident for tax purposes and thus claim low tax thresholds. The government will change the tax residency rules from 1 July 2016 to ensure anyone on working holiday visa will be treated as a non resident for tax purposes and thus pay a minimum of 32.5% tax from first dollar of income.

5% tax rebate for Individuals in business
From 1st July 2015, a 5% discount will be provided to individuals who receive business income from unincorporated entities (partnerships or sole traders). The discount will be paid in the form of a tax offset, capped at $1,000 per individual per income year.
Changes in regulations relating to Parental Leave payment
At present, individuals are able to access government assistance in the form of Paid Parental Leave, in addition to any employer-provided parental leave entitlements.
However, from 1 July 2016, government will remove the ability for individuals to double dip by taking payments from both their employer and government. The government will ensure that all primary carers would have access to parental leave payments that are atleast equal to the maximum PLP benefit which is 18 weeks at present 
FBT – Capping Threshold for Salary Sacrificed meal entertainment and entertainment facility leasing expenses (EFLEs)

Certain employers (benevolet instituition & charities) can provide concessionally taxed fringe benefits to their employees ;

  • FBT rebatable employers – capped at $30,000 (increased to $31, 177 for 2016 and 2017 FBT years)
  • Public benevolent institution and health promotion charities  - capped at $30,000 (increased to $31, 177 for 2016 and 2017 FBT years)
  • Public and non-profit hospital, and ambulance services – capped at $17,000 (increased to $17, 667 for 2016 and 2017 FBT years)

Certain benefits are currently excluded from these caps eg. meal entertainment-related benefits and EFLEs.From 1 April 2016, there will be a separate single grossed-up cap of $5000 for salary sacrificed meal entertainment and EFLEs, per FBT year, per employee. Further to this, all meal entertainment benefits will become reportable. 
Zone Tax Offset (ZTO) restricted

A taxpayer is eligible for the ZTO if they reside or work in a specified remote area for more than 183 days in an income year. This concessional tax offset is currently available to individuals who reside in specific remote areas where the cost of living is higher due to isolation or harsh environmental factors.

The ZTO will be amended to exclude fly-in-fly-out (FIFO) and drive-in-drive-out (DIDO) workers whose normal residence is not actually in the eligible zones. This measure is effective from 1 July 2015. 

Tax tips for TAX TIME 2015

  1. Collect all your tax deductible receipts
Claiming all your work-related deduction entitlements may save you considerable tax. To do so, make sure that you have all the necessary receipts or credit card statements. Typical work-related expenses include employment-related landlines, mobile phone and internet usage, computer repairs, union fees and professional subscriptions. Click here for more details. 

2. Are you working from home?
When part of your home has been set aside primarily or exclusively for work, a home office deduction may be allowed. Typical home office costs includes heating, cooling, lighting and even depreciation of your office equipment. You have to keep a four week diary to calculate hours worked from home. ATO allows 34 cents per hour of deduction without need for keeping receipts. Alternatively you can claim based on area of usage.
 3. Do you have Rental Investment Property?
Landlords can claim immediate deductions for a range of expenses such as interest on investment loans, land tax, council and water rates, strata charges, repairs and maintenance, property agent fees, gardening/mowing, insurance, pest control, advertising, travel expenses to inspect your property, lease fee etc. Landlords can also claim depreciation on any capital assets and capital works. Click here for more details. 

 4. Have you sold any shares or properties during FY 2014-15?
Review your best capital gains tax position if you have sold a property or shares for profit this year. If you have lost on shares or CFDs, ask us to review if it's capital loss or if it can be claimed as ordinary loss. Read more for details on how CGT could apply in your circumstances. Special CGT concessions may apply for your old principal residence subsequently rented out! 

  
  5. Do you have Salary packaged car, laptops and other work related items?
Efficient use of salary packaging, can reduce tax for some personal items. It is imperative to work out tax benefits before you get into these arrangements. Refer to specific question on salary packaging here. 

6. Have you spend money towards self-education expenses?
If you have incurred any expenses towards self-education expenses and your study is directly related to work, then these expenses may be tax deductible. Typical self-education expenses include, amongst others, course fees, textbooks, stationery, student union fees and the depreciation of assets such as computers and printers. Any new line of education though is considered 'too soon' to be deductible. 
7. Is your internet based sales activity a hobby or business? 
ATO will be now contacting individuals and businesses identified as running online business and not reporting income in their tax return. ATO will collect data from financial institutions for individual who have sold goods or services to the value of $20,000 or more. ATO will match data collected against income reported in individual's tax return and if any mismatch occurs, ATO may take necessary actions against the tax payer.

8. Watch out for ATO's focus on rental property expense claims.

ATO has advised that it will continue to closely screen rental property expense claims and increase its compliance focus relating to:

  • claiming deductions for properties not actually available for rent or partially available for rent – e.g. holiday homes.
  • claiming deductions before properties are actually rented or available for rent – e.g. period between your vacating your principal residence and getting a tenant in.

Refer to rental property guide for more details or contact us for assessment of your particular circumstances
 

9. Watch Out ! ATO introduces New Data Matching Programs
ATO will collect information from third parties like banks, shares registries, employers, merchants, states and territories and other government department and will compare this information against information disclosed on individual tax returns. This will enable ATO to identify individuals who have not provided correct information regarding their income and losses.

Tip! In first year of contractor reporting (introduced in FY2012-13), ATO was able to identify contractors under reporting their income and generated additional taxes of $2.3b. Data matching continues to become more and more sophisticated and accurate and is able to target tax evaders faster and more effectively!


10. Main residence 6 month rule for CGT exemption:
There are two key concessions when you convert your main residence into rental property – the 6 month rule (where both properties could be tax exempt) and the 6 year rule (where you could choose either property, but not both, to be tax exempt). ATO has identified that 6 months main residence rule is being incorrectly applied by tax payers who acquire new properties which becomes their main residence and still owns their existing properties for a period of time but claims both property as main residence for the common period till the existing property is not sold.