New Tax Relief To Start In Australia

by Mary Swire, Tax-News.com, Hong Kong

06 July 2009

New tax relief starting from July 1 will boost incentives for hard work, building on last year's tax cuts and the government's economic stimulus payments to deliver substantial benefits to low and middle-income Australians, the country's Treasurer Wayne Swan and Assistant Treasurer, Nick Sherry, have announced.

The low income tax offset (LITO) will be substantially increased, lifting the effective tax free threshold for low-income workers, and providing more incentive to participate in the workforce, particularly for part-time and older workers.

From 1 July 2009:

• the LITO will increase from AUD1,200 (USD974) to AUD1,350 (USD1,096). This means the effective tax free threshold for taxpayers eligible for the full low income tax offset will increase from AUD14,000 (USD11,379) to AUD15,000 (USD12,191);
• the 30% marginal tax rate threshold will rise from AUD34,001 (USD27,635) to AUD35,001 (USD28,443);
• the 40% marginal tax rate will be reduced to 38%; and
• the amount of income a senior Australian eligible for the senior Australian tax offset (SATO) can earn before they incur an income tax liability will increase from AUD28,867 (USD23,458) to AUD29,867 (USD24,271) for singles, and from AUD24,680 (USD20,053) to AUD25,680 (USD20,865) for each member of a couple.

The new tax relief applicable from July 1 comes on top of substantial payments to cash-constrained Australians as part of the Government's stimulus measures to support Australian businesses and jobs during the global recession.

These payments have overwhelmingly benefited low and middle-income Australians and have been very effective in supporting business activity, limiting job losses and keeping Australia from falling into technical recession, claims the Treasury.

Compared with their income tax liability for 2007-08 (and excluding the Medicare levy) by 2010-11:

• a person earning AUD20,000 (USD16,261) will have received an income tax cut of around 56%;
• a person earning AUD50,000 (USD40,653) will have received an income tax cut of around 18%; and
• a person earning AUD80,000 (USD65,046) will have received an income tax cut of around 8%.

Families who are entitled to Family Tax Benefit A will also be eligible for the government's generous Education Tax Refund for certain education expenses - like laptops, textbooks and home internet connections - incurred in the 2008-09 financial year.

For the first time eligible families will be able to claim in their 2008-09 tax return:

• a 50% refundable tax offset for up to AUD750 (USD609) of eligible expenses for each child undertaking primary school (that is, a refund of up to AUD375 (USD304) per child, per year); and
• a 50% refundable tax offset for up to AUD1,500 (USD1,219) of eligible expenses for each child undertaking secondary school (that is, a refund of up to AUD750 (USD609) per child, per year).

Further, from July 1, around 800,000 Australian families will also receive more help with child care costs following the indexation of child care rates and changes to income thresholds.

The maximum rate of the Child Care Benefit for one child using full-time approved child care will increase by AUD6.50 (USD5.24) per week to AUD180.00 (USD146), while the maximum amount of Childcare Rebate will increase by AUD278 (USD226) to AUD7,778 (USD6,323) per child per year.

The Baby Bonus will also increase by AUD185 (USD150) to AUD5,185 (USD4,214).

Payments provided under the Economic Security Strategy announced on October 14, 2008, include:

• a AUD1,400 (USD1,137) payment to singles, or an AUD2,100 (USD1,706) payment for couples combined, available to Age Pensioners, Disability Support Pensioners, Wife and Widow B Pensioners, Partner, Widow and Bereavement Allowees, Veterans' Affairs Service Pensioners, Income Support Supplement recipients and Gold Card holders eligible for Seniors Concession Allowance, Commonwealth Seniors Health Card holders, Carer Payment recipients and people of age pension age receiving Parenting Payment, Special Benefit or Austudy;
• a AUD1,000 (USD813) payment for each eligible child available to families who receive Family Tax Benefit Part A and to families with dependent children who receive Youth Allowance, ABSTUDY or a benefit from the Veterans' Children's Education Scheme.
• an increase from AUD7,000 (USD5,689) to AUD14,000 (USD11,378) for first home buyers of an established house; and
• an increase from AUD7,000 (5,688) to AUD21,000 (USD17,066) for first home buyers of a newly constructed house.

Payments provided under the Nation Building and Jobs Plan announced on February 3, 2009, include:

• a Tax Bonus of up to AUD900 (USD731) available to all Australians with incomes of AUD100,000 (USD81,303) or less who paid tax in 2007-08 after taking into account tax offsets and credits, such as the low income tax offset. The Tax Bonus is expected to benefit around 8.7 million Australians;
• a AUD900 (USD731) Single Income Family Bonus to support 1.5 million families with one main income earner;
• a AUD950 (USD772) Farmer's Hardship Bonus paid to around 21,500 drought-affected farmers and farm-dependent small business owners receiving exceptional circumstances related income support;
• a AUD950 (USD772) per child Back to School Bonus to support 2.8 million children from over 1.2 million low and middle-income families; and
• a AUD950 (USD772) Training and Learning Bonus paid to students and people outside of the workforce returning to study or help with the costs of education and training.

July 1 also marks the start of several important changes to superannuation and family tax benefits announced in this year's Budget.

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