Personal Tax Planning Opportunities

1. Medical Expense Offset

The net Medical Expense Offset is being phased out over the next few years and will cease on 30 June 2019. Eligibility rules have changed and only taxpayers with out-of-pocket medical expenses relating to disability aids, attendant care or aged care expenses or eligible. You must also have received the offset in your 2013/14 income tax return to claim the offset this year.

For those eligible, where your income is less than $90,000 for individuals or $180,000 (plus $1,500 for each dependent child) for couples or families, your net out of pocket medical expenditure in excess of $2,162 is subject to a rebate of 20%. Where your income is above these thresholds, a rebate of 10% of your net out of pocket medical expenditure above $5,000 will be claimable.

The offset applies to expenditure actually paid during the year so if you qualify it could be prudent to pay any outstanding medical expenses prior to 30th June 2015.

2. Pay As You Go Withholding (PAYGW) Variation

If you are an employee your employer is obligated to deduct PAYG Withholding Tax from your regular salary.

Assuming that your employer has withheld the correct PAYGW, when you lodge your tax return (and assuming you have minimal other income or tax deductions) there should be very little, if any, tax payable or refundable. However, where you have significant tax deductible expenses such as a net loss on your negatively geared investment property, you may be entitled to a significant tax refund.

In this case it might be advantageous to vary the amount of the PAYGW tax that is deducted from your regular pay so you get the benefit of the large tax refund progressively through the year. This is achieved by lodging a PAYGW variation with the ATO. Once processed by the ATO, your employer is authorised to reduce the amount of the tax withheld from your regular salary and wages so you effectively receive more money each pay day rather than waiting until the end of the year for your lump sum tax refund.

The PAYGW variation for the year ending 30 June 2016 can be lodged now to take effect from the first pay of the new financial year. Please contact our office if you would like to apply for a PAYGW variation.

3. Changes to ATO Processes for Assessments and Activity Statements

The Australian Taxation Office has made changes in relation to issuing Tax Refunds, Business Activity Statements and Instalment Activity Statements which will have an impact on the processing of these documents in the future. In relation to refunds on Assessment Notices, the Australian Taxation Office now require that all refunds be forwarded directly to a bank account. Accordingly, you must now provide details of the bank account you want your refund to be paid into on your Income Tax Return. As the refunds will be paid directly to your nominated bank account it will eliminate the process of sending out refund cheques and streamline the process.

In relation to Business and Instalment Activity Statements, the Australian Taxation Office has advised that they will only issue paper statements to taxpayers who lodge their activity statements in a paper form. For those taxpayers that lodge their statements in an Electronic Form (whether directly or through their Tax Agent) the statements will be sent electronically to the lodging party. Accordingly, where you have historically relied on the paper form to commence the preparation of the Activity Statement, but they have been lodged electronically by our office, you will no longer be able to rely on the receipt of these paper forms.

Other 2015 Year End Tax Planning Opportunities

Disclaimer: This newsletter contains general information only. Regrettably, no responsibility can be accepted for errors, omissions or possible misleading statements or for any action taken as a result of any material in this guide. It is not designed to be a substitute for professional advice, as such a brief guide cannot hope to cover all circumstances and conditions applying to the law as it relates to these items.