As always, the Australian Government has again made changes to income tax legislation for the new financial year. Below we have listed the top 5 most important changes that will affect your income tax liability this year.

Managing Tax Refunds

From 1 July 2013 the ATO will be depositing your income tax refund into your nominated bank account. To accommodate this, you will need to ensure you bring your bank account details with you to your tax interview with your accountant.

Income Testing of the Private Health Insurance Rebate

Your Private Health Insurance Rebate (PHIR) is now income tested against three new thresholds. Each adult covered by a policy is income tested on their share of a policy to determine their rebate entitlement. Income for PHIR purposes is calculated using the same formula as is used for Income for Medicare Levy surcharge purposes.

You will need to remember to bring to your tax interview your Health Fund Tax Statement as this will contain the data necessary to complete your return.

Items to note:

• Each adult covered on a policy, not just the payer of the policy, will receive an annual tax statement.
• If you share a policy, you will be income tested on your share of the policy irrespective of who pays the premium.
• The amount of private health insurance rebate you are entitled to may change and instead of a rebate you may have a tax debt.
• If you do not have an appropriate level of private patient hospital cover, the rate of Medicare levy surcharge you are charged may increase.

Income Testing the Net Medical Expenses Tax Offset

The ATO has changed the Adjusted Taxable Income (ATI) threshold for net medical expenses as follows:

• Up to $84,000 for singles; and
• Up to $168,000 for partners and families.The family threshold will increase by $1,500 for each dependent child after the first.

  If your ATI is above these thresholds you can only claim an offset of 10% of your net medical expenses over $5,000.

  If your ATI is below these income thresholds you are not affected by this change and can claim an offset of 20% of your net medical expenses over $2,120.

Temporary Flood and Cyclone Levy

This levy ceased to apply to individual taxpayers and trustees on 30 June 2012.

HELP Repayment Bonus: Discounts to End

The following discounts relating to the Higher Education Loan Program will be removed with effect from 1 January 2014:

• The 10% discount available to students electing to pay their student contribution up-front; and
• The 5% bonus on voluntary payments made to the Tax Office of $500 or more.

Clients with HELP debts close to being paid out in full should consider paying out their debt prior to 1 January 2014 – before the voluntary repayment discounts are removed.

Should you have any questions on the above changes or would like to book in your tax interview with your accountant please contact us.