19 Apr Recent Government Tax Changes for Individuals
There were a few interesting changes in respect of the last budget which need a little bit more of an explanation.
Motor Vehicle Tax Deductions
Motor Vehicle Expenses claimed as a tax deduction by an individual employee now have only 2 choices available to them from 1st July 2015.
The claim can be made either using a cents per kilometre method where the individual travels less than 5,000 kilometres per annum for work related purposes. It should be noted that the rate per kilometre will be a flat rate of 66 cents per kilometre irrespective of the vehicle’s engine capacity. See this article for more information on motor vehicle tax changes. Read more about motor vehicle related tax changes here.
The log book method: Employees are required to complete a log book for a period of 12 consecutive weeks recording the kilometres travelled for work related purposes. The usage recorded for work related purposed is then calculated as a percentage against the overall kilometres travelled for that period. Actual motor vehicle expenses incurred are then multiplied by the business usage percentage calculated from the log book to determine the claim to be made.
There is a further requirement to retain all documents associated with the expenses incurred in respect of the running of the vehicle including invoices for fuel, repairs, washes, insurance and registration and all of the costs associated with the running of the vehicle.
Income Tax Changes
The Budget Deficit Tax applies to individuals who earn in excess of $180,000 in taxable income. The marginal rate of tax at this level of income is 47% plus the Medicare levy of 2% which gives an effective tax rate of 49%. Ouch!
The Mature Age Workers Offset – As a part of the 2014-15 federal Budget, the Government announced that it will abolish the mature age workers tax offset from 1 July 2014. This offset was previously available to a person born before 1 July 1957.
The Medical Expense Offset ceases from 1st July 2015. So there is no longer a need to retain medical expense documents from a taxation viewpoint as the rebate is no longer available from that date. For the year ended 30th June 2015, medical expenses net of Medicare rebate and Health fund rebates must exceed $2,218 before any offset is available.
Additionally if you did not make a claim for the medical expense offset in your 2014 return you will not be able to make a claim for the year ended 30th June 2015.
Fly-in Fly-out (FIFO) Workers
The ATO recently announced that it does not consider that FIFO workers are entitled to claim expenses for travelling from home to their work destination as they consider this as normal travel from home to work which are not tax deductible. Additionally, Zone rebates will no longer be available for FIFO workers. The ATO argues that the zone rebate is to compensate those that live in remote areas for the additional living costs of goods and services as a result of the remoteness. Further it argues that FIFO workers do not suffer this additional living cost as their food and accommodation is paid for by their employer.