The recent Federal Budget package delivered no epic surprises for how your next tax return may be affected, with most significant changes highlighted for future years (for example reconfirming Stage 3 tax cuts are to commence on 1 July 2024). However, there are number of factors that impact you, which you may wish to wrap your head around.
Let's breakdown what's in place for tax, from 1 July 2023:
No change to personal tax rates or thresholds in 2023/24
For the period ending 30 June 2024, the details for residents remain as:
Taxable Income | Tax calculated |
Up to $18,200 | $0 |
$18,201 to $45,000 | $0.19 for each dollar over $18,200 |
$45,001 to $120,000 | $5,092 plus $0.325 for each dollar over $45,000 |
120,001 to $180,000 | $29,467 plus $0.37 for each dollar over $120,000 |
$180,001 and over | $51,667 plus $0.45 for each dollar over $180,000 |
Similarly for foreign residents the figures remain unchanged at:
Taxable Income | Tax calculated |
Up to $120,000 | $0.325 for each dollar |
120,001 to $180,000 | $39,000 plus $0.37 for each dollar over $120,000 |
$180,001 and over | $61,200 plus 45c for each $1 over $180,000 |
Simplified, with no change in the rates or thresholds the only change in your tax payable will be directly linked to your taxable income for the period.
The Low and Middle Income Tax Offset (LMITO) no longer available
For those previously eligible to benefit from the Low and Middle Income Tax offset (ie. those earning less than $126,000), it will no longer apply in 2023/24, as it was last applicable for the period ending 30 June 2022.
Simplified, this may result in a different tax return outcome for you. If all other factors were to remain the same, it is likely to result in a lower tax refund or potentially an overall tax payable situation.
Annual indexation of the Medicare levy threshold
Recently indexed for the financial year just passed. We would expect these figures to again be indexed for the 2023/24 financial year (likely announced as part of the 2024 Federal budget). The medical levy threshold is in place, to reduce the Medicare levy payable (ordinarily calculated as 2% of your taxable income) if your taxable income falls below it. The 2022/23 figures for the threshold amount are listed below as reference:
Individual $24,276
Families $40,939 plus $3,760 for each dependent child/student
Senior/pensioner $38,365
Families (seniors/pensioners) $53,406 plus $3,760 for each dependent child/student
Annual indexation of the Medicare Levy Surcharge threshold
The Medicare Levy Surcharge (at a rate of 1%, 1.25% or 1.5% depending on your taxable income) is payable in addition to the Medicare Levy (at a rate of 2% of taxable income) if your income exceeds the threshold and you do not hold an appropriate level of private hospital cover. The threshold has not been indexed since the 2015 financial year! From 1 July 2023, the levy will apply for those earning a taxable income of at least $93,001 for individuals and $186,001 for families, as below:
| 1% Levy | 1.25% Levy | 1.5% Levy |
Individuals | $93,001 to $108,000 | $108,001 to $144,000 | $144,001 or more |
Families* | $186,001 to $216,000 | $216,001 to $288,000 | $288,001 or more |
* Family income threshold is increased by $1,500 for each dependent child after the first child.
Changes to superannuation guarantee (not tax, but important nonetheless)
This is just a reminder as we have known about the incremental increase for some time now, however from 1 July 2023 the minimum superannuation guarantee (SG) rate increases to 11% (from 10.5%).
Small Business Support - $20,000 Instant Asset Write Off*
Temporary full expensing ended 30 June 2023, so from 1 July 2023 alternative options are available for small business (defined as those with aggregate annual turnover of less than $10 million). Eligible assets up to $20,000, which are first installed and ready for use within the 2023/24 financial year, can be claimed in full within the same financial year. For assets valued $20,001 or greater, small business can rely on the simplified depreciation pool (where assets are depreciated at 15% in the first year and 30% in each financial year there after).
*While announced as part of the 2023 Federal budget, at time of publishing this article, this measure is not yet law
Small Business Energy Incentive
For business with an annual turnover of less than $50 million, an additional 20% deduction will be available for spending that supports eligible electrification and more efficient use of energy. Up to $100,000 of total expenditure will be eligible, resulting in a possible bonus deduction of $20,000 per business.
Understanding your tax obligations is no easy feat in today's landscape, however I hope the breakdown has shed some light on what the new financial period will bring.
Please reach out if we can be of any assistance at any stage and please comment to share any other items or factors worth adding to the list, or anything else you may wish to read about soon, as more insight is always helpful!
This information has been prepared for information purposes only, current at the time of publication and is not intended, nor should be relied on as tax, legal or accounting advice. Please consult a professional advisor before engaging or relying on any content.
Comments