RSM Australia

2015-16 budget for individuals

Personal tax rates

There will be no change to personal tax rates however the Treasurer has confirmed that the Temporary Budget Repair Levy of 2% which was introduced from the 2015 year will not be extended beyond its initial 2 years.  The levy will cease at the end of the 2016-17 financial year.

Work related car expenses – changes to the cents per km rate

Taxpayers eligible to claim a deduction for work related car expenses can currently elect to use one of four different methods to calculate their claim.  The 1/3 expenses and 12% cost methods will be discontinued from 1 July 2015, meaning taxpayers will only be able to use the cents per kilometre method or log book method to claim a tax deduction for work related car expenses.

Taxpayers who currently use the cents per kilometre method may be disadvantaged if they drive a large car as the cents per kilometre rate will be capped at a single rate of 66c per kilometre for all vehicles.  The current rates are determined based on the engine capacity of the car and range from 65c per kilometre for a small car up to 77c per kilometre for a large car.

Case Study:

Ben owns a Toyota Prado which he uses for work related travel.  He travels in excess of 5,000 business kilometres per year but chooses to use the cents per kilometre method to calculate his tax deduction.  Under the current rules, Ben can claim a maximum tax deduction of $3,850 for his motor vehicle expenses.  Under the new rules, Ben’s maximum claim will be reduced to $3,300.  If Ben has a 30% average tax rate he will be $150 worse off.

Tax exemption for Government employees delivering overseas assistance to be removed

The government will introduce measures to remove the inconsistent taxation of government employees earning certain income overseas.  From 1 July 2016, the income tax exemption currently available for government employees who earn income overseas while delivering Official Development Assistance will be removed. The foreign earnings will now be treated as assessable income in Australia, which will bring the employees in line with other Australian employees.

Zone rebate restricted for Fly-in Fly-out and Drive-in Drive-out employees

Under the current laws, to be eligible for the zone offset, a taxpayer must reside or work in a specified remote area for more than 183 days in an income year.  From 1 July 2015, the zone offset will only be available to taxpayers whose ‘normal residence’ is in the remote area zone. This means that fly-in fly-out and drive-in drive-out workers who work in a remote area but normally reside in a non-remote area will no longer be eligible to claim the rebate.

Capping meal entertainment benefits for certain not for profit employees

From 1 April 2016, the government will introduce a $5,000 grossed up cap on the FBT concessions currently available to employees of certain not for profit organisations.  In the past, employees of certain not for profit organisations have been able to benefit from an FBT concession in respect of meal entertainment.   Employees could access this concession by salary sacrificing such expenditure as wedding receptions, significant birthday parties etc.  From 1 April 2016, meal entertainment benefits will be subject to a $5,000 grossed up cap per employee per year.

Meal entertainment benefits will also become reportable benefits and will therefore count towards an employee’s reportable fringe benefits amount for the year.  This may impact on an employee’s family assistance benefits and child support obligations.

HELP Debt repayments for overseas students

From 1 July 2017 Australians residing overseas who have a new or existing HELP debt will be required to make repayments towards their HELP debts if their income exceeds the minimum HELP repayment threshold.

Those students moving overseas for 6 months or more will be required to register with the ATO, and those already overseas will have until 1 July 2017 to register. Repayment obligations will start from 1 July 2017.

Expect 10% price rise on streaming video services

The government has announced that GST will be imposed on offshore intangible supplies to Australian consumers.  From 1 July 2017 consumers will pay more for purchasing offshore digital goods such as the streaming of video services such as Netflix, software and games.  The changes would result in a basic Netflix plan of $8.99 per month increasing to $9.88.

While there have been changes to online purchases for offshore digital services there has been no announced changes to the $1,000 GST threshold for purchases of physical goods from overseas.