News

Budget 2013 - the fireworks that fizzled

For as much political outrage being bandied back and forth about the inability of the current Federal Government to deliver the promised surplus, and the Opposition unable or unwilling to quantify how they intend to turn around the estimated $19.4 billion deficit, there is little to have come out of the 2013-14 Budget announcements.  However here are some key announcements that have been discussed in recent media, and others that may be relevant to your personal situation:

For individuals:

0.5% increase in the Medicare Levy

We expect this will be operated through a slight increase in what your employer taxes from your weekly/fortnightly wage.  For example on a wage of $50,000, your current tax withholding would generally be between $8,580 and $8,800 annually, depending on the rates used by your employer.  With the additional 0.5% increase in withholdings, this will mean an approximate weekly increase in tax of $5 to $10.  This is marginally less in your hand per week but hardly the doom and gloom purported by some media outlets.  If people used their EFTPOS cards to withdraw cash at the supermarket or the correct bank ATM to avoid those $2.50 "non- operator ATM fees", they'd probably have more in their pocket each week.

Phase out of the net medical expenses tax offset (NMETO)

The previous 20% deduction for net medical expenses over $2,060 will be phased out over the coming years.  From 1 July 2013, taxpayers will be eligible to claim the NMETO for the 2013-14 income year only if they:

  1. Have eligible out-of-pocket medical expenses above the relevant thresholds; and
  2. Claimed the NMETO for the 2012-13 income year.

The eligibility and the deduction allowed will be income tested.

Income Year

Adjusted taxable income for rebates

Singles < $84,000 or Couples/families < $168,000

Singles > $84,000 or Couples/families > $168,000

2011-12

 

20% of expenses > $2,060

2012-13

20% of expenses > $2,120

 10% of expenses > $5,000

 

2013-14

 20% of expenses > $2,120 provided the taxpayer made a NMETO claim in the 2012-13 income year

 

10% of expenses > $5,000 provided the taxpayer made a NMETO claim in the 2012-13 income year

2014-15

 20% of expenses > $2,120 provided the taxpayer made a NMETO claim in the 2013-14 income year

 

10% of expenses > $5,000 provided the taxpayer made a NMETO claim in the 2013-14 income year

Taxpayers will be able to continue to claim the NMETO for out-of-pocket medical expenses relating to disability aids, attendant care of aged care expenses until 1 July 2019 when DisabilityCare Australia is fully operational and aged care reforms have been in place for several years.

Annual cap of $2,000 on work-related self-education expenses

This will see the end of overseas conference junkets being taken as an enabler for a large tax deduction.  However, this will adversely affect employees in professional occupations such as doctors, lawyers, accountants etcetera who are required to maintain professional development hours as part of their industry accreditations.  Where the employee pays for courses and training requirements themselves, the allowable deduction threshold of $2,000 is often well below the actual costs incurred.

Increase of superannuation concessional contributions caps for individuals 50 and over

A proposed reform not yet legislated; the Government seeks to increase the allowed concessional cap from $25,000 per individual per year to $35,000.  For individuals aged 60 and over, this increase would occur from 1 July 2013, and for individuals 50 and over, the following financial year (1 July 2014).  This would allow and encourage more people to contribute more savings to their superannuation funds tax effectively as they begin to plan their retirement funding strategy.

For general small to medium business:

There was barely a mention in the Budget for the small to medium business sector. 

A positive announcement related to the R&D Refundable Tax Credit system. From 1 January 2014, eligible companies will be able to claim their R&D tax offset on a quarterly basis.  This measure will allow for advance payment of the 45% refundable offset which is designed to improve cash flow for small innovative companies.  Practically, we expect this will operate through the Business Activity Statement as an additional credit claimable.  If you think your business is involved in eligible R&D practices, contact our specialist advisors today to discuss assessing and registering your business for the 2013-14 financial year.