Low income tax offsets
June 24th, 2007There are a lot of tax offsets increasing their thresholds from 1 July 2007. Must be an election coming up soon.
A tax offset is a money the government gives back to you to help reduce your tax debt if you are a low income earner. Please not, this is not money back, it just reduces your tax liability. It will not go below zero (with a couple of exceptions and these have been mentioned in an earlier blog).
There were changes from July 1, 2006. There are more coming up from 1 July 2007. In brief, they are:
- Low income offset: Increase from $600 to $750 per year.
- Senior Australians tax offset: Pay no tax up to $25,867, up from $24,867 for singles. For couples, $43,360 up from $41,360.
- Dependent spouse rebate: Increase from $1,655 to $2,100 per year.
- Medicare low income threshold: Increases to $16,740 for individuals and $28,247 for families. Additional amount for each dependent child will increase to $2,594.
- Pensions below pension age will increase to $21,637.
It may not mean much now, but you will notice it come tax time next year.
New tax rates from July 2007
June 17th, 2007Great news for residents on low incomes. From July 1 2007, the 30% threshold will again increase. What does this mean?
For the tax year July 1 2006 to June 30 2007, the rates were as follows.
$0 to $6000 tax rate = nil
$6001 to $25,000 tax rate = .15c (15%)
$25,001 to $75,000 tax rate = .30 (30%)
$75,000 to $150,000 tax rate = .40 (40%)
Over $150,000 tax rate = .45 (45%)
For non-residents, the tax rate for $0 to $25,000 = .29 (29%), then follows as for residents.
From July 1 2007, the 30% threshold changes yet again. All others remain the same until 2008.
The new threshold from $6001 to $30,000 will be .15 (15%)
The 30% threshold begins at $30,001 instead of $25,001. An additional 15% on $5,000 is $750. Not counting medicare, HELP and other schooling debts, you should be getting an additional $14 approximately in your pay each week.
There will be further changes the following year—that is the 2007-2008 tax year.
Thresholds from July 1 2008 will be:
$0 to $6000 tax rate = nil
$6001 to $30,000 tax rate = .15c (15%)
$30,001 to $80,000 tax rate = .30 (30%)
$80,000 to $180,000 tax rate = .40 (40%)
Over $180,000 tax rate = .45 (45%)
For non-residents, the tax rate for $0 to $30,000 will be .29 (29%), and then follows as for residents.
I will let you do the sums yourself.
Superannuation co-contribution
June 5th, 2007Lucky you if you made an eligible contribution to super last year (2005-2006 tax year). That means you paid an additional amount into your super fund and met the criteria for the government co-contribution where they paid up $1.50 for every additional $1.00 to a maximum of $1,500.
If you did this before the end of June 2006, the the government is going to reward you by giving and additional one-off payment of the same amount. In other words, the government is going to double what they initially gave you.
Isn’t it a pity we can’t back-date and all do it. I would have liked and additional $3,000 paid into my super fund.
Remember though, you can still make a contribution before the end of June each year. The government will still give you the 150% co-contribution if you meet the criteria, which is nothing to sneeze at.
Can you claim your schooling-related expenses
May 18th, 2007The question as to whether you can claim self-education expenses as tax deductions comes up a lot. I have covered it before, but it’s worth covering again. It’s an issue that causes a lot of confusion.
Two common misconceptions are:
- People who are studying to get a better job believe they can claim schooling when they can’t
- People who are eligible for tax deductions for schooling don’t realise they can claim.
ATO has a basic tool that allows you to determine whether you are eligible to claim self-education expenses.
Once you have determined whether or not you are eligible, a good place to get further information is from the ATO’s Study Essentials page.
Tax training — what’s new this year
April 25th, 2007The big news is, of course, the superannuation changes.
Even though the bulk of these changes don’t come in this tax year (2006-07), we still need to know what the changes are and how they will influence our clients’ tax position.
More on the changes as we get further into the training.
Doing the advanced tax course. Is it fate, or carelessness?
March 29th, 2007The letter came last week. It was time to sign up again for tax schooling.
I had planned to repeat the intermediate course, just to be sure I had grasped all the details correctly.
I really wanted to spend time making sure I had all the details sorted out properly before I took the advanced course. The advanced course is shorter, more rushed, just an update on new information. We are supposed to know it all by now.
I raced down to collect my books and sign up. I could not believe there were so few spaces left. An extra class was allocated, but it was on a Wednesday night. So I booked in for Tuesday morning. The books hadn’t arrived yet. We would be given them in class. I can’t believe I was so disappointed at not getting my books. I had been hoping to get started on them before the class.
Back home, I looked at the start date. I had been booked into the advanced class. I rang up to change. Why would you want to do the intermediate? You ran the office last year yourself. You need the advanced.
Cab Sav says it was meant. She had wanted me to do the advanced anyway, so now I was. Looks like I will have a lot of work to do.
Child Care Benefit (CCB) Tax Offset
March 25th, 2007I want to talk a little about the 30% child care tax rebate that was brought in as a new tax offset last financial year. This offset confuses many people, including some tax preparers.
Approved care is formal child care including:
- Long day care
- Family day care
- In-home care
- Outside school hours care
- Vacation care
- Some occasional care services.
You must meet the following criteria when claiming a CCB.
- The care must be approved and registered. Registered, on its own, is not enough to be eligible for a rebate
- This care does not relate to the last financial year but the year before. i.e. If you are doing your tax return for the financial year from 01/07/2006 - 30/06/2007, then your child care rebate will relate to the year 01/07/2005 - 30/06/2006. (Confusing, isn’t it)
- Parents must either be working, performing voluntary work, looking for work, training or studying
- You can claim up to 50 hours of CCB per child per week.
Registered care is informal care provided by relatives, friends, nannies, some pre-schools and kindergartens and other outside school hours care. These are not always approved care by the Australian Government, so will not entitle you to the rebate.
The care provider must be registered with the Family Assistance Office to enable the you to claim the minimum CCB against the care fees charged.
The Family Assistance Office should be able to advise taxpayers if they are using an approved child care service.
The rebate is 30% of the taxpayers out-of-pocket expenses. Your total child care fees for approved care less the actual CCB entitlement.
Tax: if it wasn’t this serious it would be funny
March 17th, 2007An old accounting joke goes something like this:
A business man interviewing applicants for the position of divisional manager devised a simple test to select the most suitable person for the job. He asked each applicant the question, “What is two and two?”
The first interviewee was a journalist. His answer was “Twenty-two.”
The second was a social worker. She said, “I don’t know the answer but I’m glad we had time to discuss this important question.”
The third applicant was an engineer. He pulled out a calculator and showed the answer to be between 3.999 and 4.001.
The next person was a lawyer. He stated that in the case of Sage vs Bliss in 2003, two and two was proven to be four.
The last applicant was an accountant. The business man asked him, “How much is two and two?”
The accountant got up from his chair, went over to the door and closed it, then came back and sat down. He leaned across the desk and said in a low voice, “How much do you want it to be?”
Needless to say, the accountant got the job.
Sometimes, that joke could equally apply to a tax agent as to an accountant.
Tax is a serious business generally, so I thought it time to lighten up a little.
http://users.bigpond.net.au/renton/916.htm
http://www.workjoke.com/projoke43.htm
Spouse Super Tax Offset
March 8th, 2007What is the Spouse Super tax offset?
If you make contributions to a superannuation fund on behalf of your spouse, you may be entitled to a tax offset.
As always, there are certain criteria to meet:
- Your spouse’s assessable income, plus any reportable fringe benefits must be less than $13,800 (current as at 30/06/2006)
- Both the taxpayer and spouse must be Australian residents
- A rental loss will affect this, as it is generally added back into the income for this purpose.
Superannuation rules change all the time, so always check the current tax rules when claiming. Your tax preparer should have all the correct information at the time you complete your tax return.
Currently though, the superannuation tax offsest is calculate at 18% of contributions up to a ceiling of $3,000. The maximum tax offset therefore, is $540. To be able to claim the maximum offset, the spouse’s assessable income should be $10,800 or less, and the contributions need to be a minimum of $3,000.
If you are completing your own tax return, this is claimed at Item T7 on your return.
More on the Tax Course
February 20th, 2007Those of you who were thinking about doing the tax course contact your local H&R Block and ITP office as soon as possible. Courses have started. You may squeeze into a class if you are a week or so late, but will have to study hard to catch up if you miss the first couple of classes.
Something that was not mentioned in my earlier post on these courses is that the tax course itself is tax deductible. It goes under Item D10, Managing your tax affairs, on your tax return. Don’t forget to record your travel to and from the course as well.
And of course, keep all your receipts for both the course and your books and your stationery.
