As foreshadowed before the Budget, the Government announced the introduction of a Budget deficit levy (tax), to apply for 3 years commencing on 1 July 2014. It is formally known as the Temporary Budget Repair Levy. The temporary levy will apply at 2% for incomes over id=”mce_marker”80,000 ie 2% on taxable income in excess of id=”mce_marker”80,000. Individuals with taxable income of $200,000 will pay 2% of $20,000 ie a levy of $400. Those with taxable income of $300,000 will pay 2% of id=”mce_marker”20,000 ie $2,400 of levy.
A number of other tax rates that are currently based on calculations that include the top personal tax rate will also be increased. With the exception of the FBT rate, these tax rates will be increased for the same period that the Temporary Budget Repair Levy is in place. These consequential amendments are important to maintain integrity and fairness in the tax system.
FBT rate increase – The Government said that to prevent high income earners from utilising fringe benefits to avoid the levy, the FBT rate will be increased from 47% to 49% from 1 April 2015 until 31 March 2017 to align with the FBT income year. The cash value of benefits received by employees of public benevolent institutions and health promotion charities, public and not-for-profit hospitals, public ambulance services and certain other tax-exempt entities will be protected by increasing the annual FBT caps. In addition, the fringe benefits rebate rate will be aligned with the FBT rate from 1 April 2015.
Personal tax rates – In last year’s 2013-14 Federal Budget, the then Labor Government confirmed its earlier announcement that the already legislated increase in the tax-free threshold to id=”mce_marker”9,400 from 1 July 2015 would not proceed – it was to be “deferred” (2013-14 Budget Paper No 2 [p 24]). Amending legislation would have been required to implement that announcement. The Labor Government had not introduced such legislation before the 2013 Federal election. The Coalition Government had included the measure in its package of carbon tax repeal Bills, specifically the Clean Energy (Income Tax Rates and Other Amendments) Bill 2013, but those Bills were defeated in the Senate in March this year.
So, as currently legislated, plus including the newly announced temporary debt levy, the personal income tax rates and thresholds are summarised for resident taxpayers in the table below (note that these rates do not include the Medicare levy, currently 1.5%, but to rise to 2% from 1 July 2014):
|Personal income tax rates and thresholds|
With Medicare levy included, the top marginal rate would be 49% from 1 July 2014 to 30 June 2017.
[WTB 20, 13/5/14]