Of the 96 unenacted measures 4 were related to the carbon and mining tax measures and have since been addressed. Of the remaining 92 measures, the Government will proceed with 18 initiatives, some will be amended and others will not go ahead. The Government is currently undergoing consultation to determine the fate of the remaining announcements with the view of scrapping them if there are no compelling reasons to pursue them.
Some of the measures that will not be proceeding are perhaps of most importance and it is undoubtedly good news for the taxpayers that these measures were scrapped after all.
What’s not going ahead?
- Self-education expenses cap of $2,000. This measure was aimed at limiting the deduction available to employees for undertaking self-education, such as the cost of professional development courses, conferences and seminars. The Coalition’s figures show that, contrary to initial claims of abuse of the self-education deduction rules by high income earners, 80% of claims over $2,000 were actually made by people earning less than $80,000.
- This is a positive development for those employees who are required to undertake professional development activities and bear the costs themselves, especially where these require significant travel and accommodation expenditure. It also benefits sole trader businesses and those that salary package training and education costs.
- Proposed scrapping of the statutory formula method for calculation of Fringe Benefits Tax (‘FBT’) and employee reimbursements on cars. The statutory formula method frequently results in a more favourable outcome, in particular for cars with low business use, when compared to the operating cost method which requires employees to keep a logbook and calculate FBT on the private use portion of actual costs incurred. The Coalition announced that the statutory formula method will continue to be valid and new salary sacrificing arrangements in relation to cars will operate as before.
- This is good news for employees who salary sacrifice cars with little or low business use as well as for employees who use employer-owned cars and reimburse the employer for the private use portion of car costs. This news will also be welcomed by the automotive industry and charities which are able to rely on their FBT concession to provide competitive remuneration packages to their employees by virtue of salary sacrificed cars.
Tax on income from superannuation pension accounts. A Labor pre-May 2013 Budget announcement that had caused some angst, this measure was intended to cap the tax-free status of income generated by pension accounts at $100,000 per person per year. The proposal also included some complex transitional rules for income from capital gains. The Coalition Government has acknowledged what accountants have been saying all along – the proposal would have been extremely complex to implement and would result in undue compliance costs being incurred by taxpayers.
- The scrapping of this announcement is great news for anyone with pension accounts that are likely to generate income over $100,000 per year – likely anyone with about $1.25m in pension assets and above.
What is going ahead?
Far less exciting than the above measures, there are however some initiatives that are going ahead that should be noted.
The Government has confirmed its plans to phase out the Net Medical Expenses Tax Offset (‘NMETO’). From 1 July 2013, only those taxpayers who were able to claim the NMETO in the 2013 income year would continue to be eligible for the offset in the current 2014 income year. Similarly, only those who claim the NMETO in the 2014 income year will continue to be eligible for the offset in the 2015 income year.
- This effectively means that if you were unable to claim the NMETO in the 2013 year, you lost your eligibility for the tax offset in the 2014 and 2015 years.
- It is therefore important to recap on the 2013 NMETO eligibility criteria:
You, your spouse and your dependent children (under 21) have combined out of pocket eligible medical expenses (i.e. not reimbursed by Medicare or your private health insurer) above the relevant threshold, depending on your family income;
- The relevant threshold for singles on adjusted taxable income below $84,000 or $168,000 for couples/families is $2,120 and the maximum rebate is 20% of the amount exceeding the threshold;
- The relevant threshold for singles on adjusted taxable income above $84,000 or $168,000 for couples/families is $5,000 and the maximum rebate is 10% of the amount exceeding the threshold;
- The family income test is increased by $1,500 for each dependent child after the first regardless of the family income;
- The adjusted taxable income includes such amounts as adjusted fringe benefits, reportable super contributions (i.e. salary sacrifice and deductible personal contributions by the self-employed) and investment/rental property losses are added back.
- The Government will implement the change to eligibility for the use of Farm Management Deposits by increasing the non-primary production income threshold from $65,000 to $100,000 with effect from 1 July 2014. This is a positive development for primary producers who use Farm Management Deposits to manage their tax liabilities.
The Government will proceed with increasing the thresholds below which lost superannuation accounts will be transferred to the Australian Tax Office for safekeeping until account owners reclaim their lost super. The threshold will go up to $4,000 from the current $2,000 on 31 December 2015 and the threshold will increase further to $6,000 on 31 December 2013.
- Please note that you are able to check whether you have any ‘lost’ superannuation accounts kept by the ATO by using the free Government search service Super Seeker online:
- Please contact your Ruddicks adviser if you require any assistance with searching or reclaiming any lost superannuation accounts.
We expect to hear more about the future of the 64 announcements which remain in limbo, as the Government proceeds with the consultation process. Among the 64 measures is the proposed favourable new treatment of earnout arrangements for capital gains tax purposes. If this measure is retained and legislated it will provide a more advantageous and less convoluted outcome for anyone buying or selling a business with the use of earnout arrangements.
We encourage you to contact your Ruddicks adviser if you have any questions regarding the proposed changes and how they might apply to your circumstances.