Personal Income Tax Rates 2017-18
|Taxable income||Tax on this income*|
|0 – $18,200||Nil|
|$18,201 – $37,000||19c for each $1 over $18,200|
|$37,001 – $87,000||$3,572 plus 32.5c for each $1 over $37,000|
|$87,001 – $180,000||$19,822 plus 37c for each $1 over $87,000|
|$180,001 and over||$54,232 plus 45c* for each $1 over $180,000|
A Federal Budget 2014-15 measure applied a Temporary Budget Repair Levy of 2% to taxable incomes in excess of $180,000 to take effect for 3 years from 1 July 2014 until 30 June 2017. This in effect increases the highest marginal tax rate as in the table above from 45% to 47% (before Medicare). The relevant legislation is now law and is incorporated in the tax table above.
*The above table does not include Medicare Levy or the effect of any Low Income Tax Offset (“LITO”). Medicare Levy is applied on a progressive basis if eligible private health insurance cover is not maintained. There are low income and other full or partial Medicare exemptions available. A Medicare Levy Surcharge may also be applicable. The 2017 Budget made no changes to the personal income tax scale for residents, however the temporary budget repair levy of 2% applicable to higher income earners ($180,000) ended on the 30th June 2017 according to its original 3-year time frame.
The 2017-18 financial year starts on 1 July 2017 and ends on 30 June 2018. The financial year for tax purposes for individuals starts on 1st July and ends on 30 June of the following year.
Medicare Levy Surcharge (“MLS”)
In 2017-18 the Medicare Levy applies at a progressive basis at the additional rate of 2%.
If eligible private health insurance cover is not maintained the MLS adds a further levy of 1% to 1.5% depending on your income. If you hold private hospital cover from 1 July 2017 (with a hospital excess of $500 or less for singles, or $1,000 or less for couples/families) and maintain it throughout the financial year, you would be exempt and won’t pay any MLS. MLS only applies when your annual taxable income exceeds $88,000 for singles or $180,000 for couples and you do not hold approved hospital cover with a registered health fund. In the event that you do not maintain your cover for the full financial year, you’ll pay the surcharge for every day you weren’t covered under your private health cover. There are low income and other full or partial medicare exemptions available.
Low Income Tax Offset (‘LITO’)
The Low Income Tax Offset full amount in 2017-18 is $445 reducing by 1.5 cents in the dollar, for every dollar of taxable income over $37,000, such that it cuts out at an income of $66,667. The effect is that no tax is payable up to an income of $20,542.
What’s New in 2017-18?
Medicare Low Income Earners – The Budget 2018 announcement of 8 May 2018 set out CPI uplifts to the Medicare levy low income thresholds.
Government super contribution for lower income earners: Under legislation passed in September 2014 the Low Income Superannuation Contribution (“LISC”) benefit ceases on 30 June 2017. Determination of eligible LISC claims will cease on 30 June 2019. The 2016 Budget however contained a similar new measure to commence on 1 July 2017 for which legislation has now been passed –
Spouse super tax offset: The full rebate spouse income threshold has been increased from $10,800 to $37,000 to apply from 1 July 2017, with a shading out on incomes between $37,000 and $40,000. The maximum rebate (calculated at the rate of 18% of maximum rebatable contributions) remains at $540.
Superannuation Caps and Pensions Rules – From 1 July 2017
Modified super contribution cap and retirement rules introduced, starting from 1 July 2017. The changes include:
- The annual concessional contributions cap is fixed at $25,000, non-concessional $100,000 subject to $1.6 million limit on total super balance
- changes to the bring-forward rules, including transitional measures
- transfer balance cap: a limit of $1.6 million on the total superannuation which an individual can move to the tax-free retirement phase
- transition to retirement pensions excluded from the tax-free retirement phase tax-free treatment
Superannuation death benefits – ‘anti-detriment‘ deduction removed from 1 July 2017
First home supersaver scheme: Salary sacrifice for first home-owner savers – super contributions made from 1 July 2017 may be withdrawn from 1 July 2018 for a first home deposit. See further: First Home Super Saver Scheme
Home downsizing super contributions for 65 year olds: Downsizing contribution scheme for those aged 65 years and over introduced as part of the First home supersaver scheme legislation applies to home sale contracts exchanged from 1 July 2018.
Residential rental property owners are to be hit with deduction limitations and a foreign owner’s fee under measures proposed in the 2017 Budget:
- Deductions for travel expenses related to a residential rental property not allowed from 1 July 2017
- Depreciation of plant and equipment claims will be restricted to the owner who actually purchased the asset. This will apply prospectively to assets purchased after 7.30pm on 9 May 2017.
- Foreign owners of residential real estate from 9 May 2017 will be hit with an annual vacancy fee where the property is not occupied or genuinely available on the rental market for at least 6 months in 12.
Personal super contributions
The requirement that an individual must earn less than 10% of their income from employment to be able to claim a deduction for personal superannuation contributions has been removed from 1 July 2017.
Higher income earners’ additional tax on super contributions (Div 293 tax): the threshold at which high-income earners pay Division 293 tax on their concessional taxed contribution to superannuation is $250,000 from 1 July 2017 (down from $300,000).
HECS-HELP repayments by overseas graduates
Repayment obligations commence 1 July 2017 From 1 January 2016, for taxpayers who have moved overseas for more than six months.
Working Holiday Maker Visa Holders (“Backpackers”) – Departing Australia
As part of changes introduced in 2017, the Departing Australia Superannuation Tax goes to 65% from 1 July 2017. Non-WHM visa holders remain taxed at 35% or 45%.
CGT and real property disposals by foreign residents
From 1 July 2017 the withholding scheme will be modified:
- threshold (contract price) lowered to $750,000 (previously $2 million)
- withholding tax rate increased to 12.5% (previously 10%)
The main residence exemption (subject to passage of legislation) is to be removed for non tax residents from 9 May 2017 with a grandfathered period for existing holdings until 30 June 2019.
- The small business instant asset write-off (up to $20,000) has been extended by 1 year to 30 June 2018. A Budget 2018 proposal will see it extended by a further year to 30 June 2019 (subject to legislation being passed).
- company tax rate 27.5% for ‘base rate’ companies – those with aggregated turnover under $25 million (up from $10 million).
- FBT rate is 47% (down from 49%) as from 1 April 2017
- simplified BAS returns implemented from 1 July 2017
- Digital currency (bitcoin) to be treated as money from 1 July 2017 to relieve potential double GST.
Affordable Housing Incentives
A Budget 2017 initiative: The MIT investment incentives are to be expanded to allow investment in affordable housing (from 1 July 2017) and individual resident investors will be eligible (from 1 Jan 2018) for a higher capital gains tax discount of 60% (up from the existing 50%).
Exploration Development Incentives
The government has introduced measures for a revised Junior Minerals Exploration Incentive to operate from 1 July 2017 covering expenditure for the 2017-18 and following years. The scheme has both funding and claim caps.
- Medical expenses – the tax offset is being phased out – from 2015–16 until 2018–19, claims for this offset are restricted to net eligible expenses for disability aids, attendant care or aged care. Net expenses are your total eligible medical expenses minus benefits from Medicare, National Disability Insurance Scheme (NDIS) and private health insurers which you or someone else, received or are entitled to receive. This offset is income tested. If you are eligible for the offset, the percentage of net medical expenses you can claim is determined by your adjusted taxable income (ATI) and family status.
- Non-Residents Capital Gains Tax:
- Amendments will be made to the principal asset test to ensure that property is taxable if disposed of by a foreign resident with effect from 7.30pm (AEST) on 14 May 2014, and transactions within a tax consolidated group will be ignored.
- Withholding tax: From 1 July 2016 a 10% non-final withholding tax will apply to the disposal by foreign residents of certain taxable Australian property. The purchaser will be required to send 10% of the sale proceeds to the Tax Office. This measure will not apply to residential property under $2.5 million or to Australian residents.
- Thin capitalisation and other rules governing interest deductibility by multinational entities are being tightened with effect from 1 July 2014
- Super contribution caps – concessional caps remain the same as previous year at $30,000 – the concessional cap is $35,000 for anyone aged 49 years or more immediately before (i.e. on 30 June) the beginning of the previous financial year. The Non-concessional CGT cap has been indexed as per existing law. (Note however, a number of very significant changes apply from 1 July 2017.)The tax laws limit the amount of money you can voluntarily contribute to your super account on a concessional basis. This is achieved by setting the superannuation contribution limits (“caps”) which operate to ration the tax benefits available each year. There is also a limit to the tax concessions you can receive on each year’s contributions, and from 1 July 2017 there is also a cap (dollar limit) on the value of the superannuation balance which can support concessionally taxed income streams. Concessions on higher income earners’ contributions are reduced through the application of an additional (“Division 93”) contributions tax.Super funds over the limits are subject to additional tax. Excess concessional contributions are counted towards the non-concessional cap. To avoid penalty rates of tax, from 1 July 2013 excess concessional contributions can be withdrawn, and taxed at the individual’s marginal rate plus interest. Legislation was passed in March 2015 to treat excess non-concessional contributions on a similar basis. The potentially higher tax means that in most instances members will want to keep super contributions, and their total funds, within the specified caps.
- From 1 July 2017, the Government will improve the integrity of the superannuation system by including the use of limited recourse borrowing arrangements (LRBA) in a member’s total superannuation balance and transfer balance cap.
- The Government will allow a person aged 65 or over to make a non-concessional contribution of up to $300,000 from the proceeds of selling their home from 1 July 2018. These contributions will be in addition to those currently permitted under existing rules and caps and they will be exempt from the existing age test, work test and the $1.6 million balance test for making non-concessional contributions.
The measure will apply to sales of a principal residence owned for the past 10 years or more, and both members of a couple will be able to take advantage of this measure for the same home.
- Changes to concessional (pre-tax) contributions rules from 1 July 2017 a number substantial changes to the superannuation rules relating to contributions caps come into effect:
- the 10% ‘maximum earnings’ condition for personal super contributions deductions is removed
- the concessional superannuation contributions cap is reduced to $25,000, indexed to AWOTE (applicable to all age groups)
- Backpacker Tax – From 1 January 2017, temporary working holiday makers will be taxed at a the rate of 15% for incomes up to $37,000. Over $37,000 the normal non-resident tax rates (starting at 32.5%) apply. The Employer registration deadline was extended to 31 January 2017, and employers will need to issue separate payment summaries (group certificates) for periods before and commencing 1 January 2017. In the same bundle of measures, the application charge for working holiday maker visas will also be reduced by $50 to $390, however from 1 July 2017 the rate of tax on the Departing Australia Superannuation Payment (DASP) goes up to 65%. The departure tax (Passenger Movement Charge) is also up by $5.
- HECS-HELP repayments to graduates living overseas: Australian graduates living overseas will be brought into the HECS-HELP repayment arrangements based on income (above the HELP/TLS income thresholds) in the 2016-17 tax year.
- HECS-HELP Benefit incentives for graduates in the fields of early childhood education, maths, science, education and nursing will no longer be available after 2016-17. A maximum of 2 years is allowed to lodge applications, with no late applications being accepted.
- Voluntary and upfront HECS-HELP payments bonuses will no longer be available after 1 January 2017.
- Capital Gains Withholding/clearance on disposal of properties by foreign residents – Foreign resident capital gains tax withholding requirements apply to foreign resident vendors of taxable Australian property under contracts entered into from 1 July 2016. The system also provides for a clearance certificate process to enable tax-resident vendors to avoid the withholding, or for variation of the rate. The obligation is placed on purchasers to collect and remit the tax. Other features of the scheme:
- The requirements apply where the contract price is $2 million or more
- The withholding tax rate is 10% – to be withheld at settlement.
- The tax is non-final – which enables the vendor to claim the credit when lodging an Australian tax return.
- Main residence exemption (non-residents) – Under a 2017 Budget proposal, foreign and temporary tax residents will be denied access to the CGT main residence exemption from 7:30PM (AEST) on 9 May 2017. Existing properties held prior to this date will be grandfathered until 30 June 2019
Tax Free Income
Amounts that you don’t pay tax on can fall into three categories. They are:
- exempt income
- non-assessable non-exempt income, and
- other non-taxable amounts which don’t affect your tax return.
Home Office Expenses
Tax deductions for Home Office expenses can be claimed if your home is a place of business, or if it is used as part of your income earning activities.
If your home is not a place of business, then your claims are restricted to running expenses only. This may include a portion of your heating, lighting, and telephone, and depreciation of equipment.
Less commonly, if your home is used as a place of business, then occupancy expenses such as rent, interest, rates and insurance may be claimable as well, but this may affect your capital gains residence exemption.
Records and Proof
For substantiating a claim, you can
- keep records which support the actual costs incurred, and which indicate the correct non-deductible apportionment, or
- keep a representative four-week diary to establish a pattern of usage. If there is no regular pattern, then records of the duration and purpose of each occasion must be kept.
A claim is not allowed where there is no additional cost incurred (such as a working area shared by normal domestic activity) or if the income producing activities are merely incidental.If the diary basis of claim is used, the Tax Office accepts a fixed rate of 34 cents per hour to cover electricity, gas and depreciation of office furniture.
Tax Time Videos
VIDEO ONE – Fringe Benefits
- Work Related Travel
- Record Keeping
- FBT Tax
VIDEO TWO – Rental Properties & Tax
- Tax Obligations
- Record Keeping
- Depreciation Schedule
- Repair Costs
- Improvement Costs
- Capital Gains