H&R Block Tax Accountants

PERSONAL INCOME TAX

Dependant spouse rebate to be phased-out for spouses under 40 - Effective for the 2012 tax return

The dependant spouse rebate will be phased out for taxpayers with a dependant spouse born on or after 1 July 1971.

Taxpayers with an invalid or permanently disabled spouse, supporting a carer, or people who are eligible for the zone, overseas forces and overseas civilian tax offsets will not be  affected by this change.

Minors no longer entitled to low income tax offset on unearned income - Effective for the 2012 tax return

The Government will remove the ability of minors (children under 18 years of age) to access the Low Income Tax Offset (LITO) to reduce tax payable on their unearned income, such as dividends, interest, rent, royalties and other income from property.

Income earned by minors from work will still be eligible for the full benefit of the LITO.  Unearned income of minors who are orphans or disabled, as well as compensation payments and inheritances received by minors, will not be affected by this measure.

Low income tax offset brought forward- Effective for the 2012 tax return

The Low Income Tax Offset will now be able to be claimed as a reduction in tax installments rather than having to wait to lodge the tax return.  LITO benefit will still be paid as a lump sum on assessment of income tax returns, but the benefit given as lower PAYGW rates. Editor’s note: this will be affected by a change to the PAYG withholding rate

HECS discount  - Effective from 1 January  2012

 From 1 January 2012, the following discounts applying to HECS payments will be reduced:

• The discount available to students electing to pay their student contribution up-front will be reduced from 20% to 10%, and
• The bonus on voluntary payments to the Tax Office of $500 or more will be reduced from 10% to 5%.

Family Tax Benefits and family payments adjustments  - Effective for the 2012 tax return

Advances

Families in receipt of Family Tax Benefit (FTB) Part A will be eligible for an advance of up to 7.5 percent up to a maximum of $1,000, of their annual FTB Part A entitlement.  Advances will be repaid over six months by reducing future fortnightly FTB payments. Payment of advances will be subject to an assessment of a family's ability to repay the advance without falling into financial hardship.

Advances can be taken at any point throughout the year.       

Eligibility

The eligibility for FTB Part A will be limited to children up to the age of 21 years, as young people aged 22 and over are considered independent. When a child turns 22 years of age, parents will no longer be able to receive FTB Part A for that child but the child may be eligible to receive Youth Allowance subject to usual means testing and academic progress rules.

 Indexation

Indexation of the FTB Part A and B supplements will be suspended for 3 years. The FTB supplements will be fixed at the current 2010/11 levels of $726.35 per annum per child for FTB Part A and $354.05 per annum for FTB Part B until 1 July 2014 (rather than being CPI-indexed). Indexation of family payment higher income thresholds and limits will also be paused at their current level until 1 July 2014 (rather than being CPI-indexed).

This means that:

FTB Part B primary earner income limit will remain at $150,000

• the income limit for receiving the dependency tax offsets will remain at $150,000
• the Baby Bonus eligibility limit will remain at $75,000 of family income in the six months following the birth or adoption of a child, equivalent to $150,000 a year
• the Paid Parental Leave primary carer income limit will remain at $150,000 in the financial year before the birth or adoption of a child, and
• the higher income-free threshold of FTB Part A will remain at $94,316 of family income, with an additional $3,796 provided for each child after the first.
• Income limits are the amount a family can earn before they are no longer eligible for family payments, and the higher income-free area for FTB Part A is the income level at which FTB payments begin to reduce.

Tax-free apprenticeship payments

From 1 January 2011, eligible Australian Apprentices have received an additional tax-exempt bonus of up to $1,700 as they reach milestones in their training, including an $800 completion bonus, bringing them to a total of a maximum of $5,500 over the course of their apprenticeship.

Education Tax Refund (ETR) to include school uniforms effective from 1 July 2011 - (Impacting the 2012 Tax Return)

Government announced that it will extend the ETR to cover school uniform expenses