Individuals and Families
Personal Tax Rates
Personal tax rates are unchanged. The 2% Temporary Budget Deficit Levy for taxable incomes over $180,000 will not be extended and will, as expected, cease at the end of the 2016-17 income year.
Table 1: Personal income tax rates and thresholds
Work Related Car Expenses
The Government is simplifying the methods of calculating work‑related car expense deductions from 1 July 2015.
Two of the four currently existing methods, the '12% of original value method' and the 'one‑third of actual expenses method', are to be abolished.
The 'cents per kilometre method' will be adapted. The three current rates based on engine size will be replaced with one rate set at 66 cents per kilometre to apply for all motor vehicles, with the Commissioner of Taxation responsible for updating the rate in following years.
The 'logbook method' of calculating expenses will be retained. These changes will not affect leasing and salary sacrifice arrangements.
The government notes that these changes will better align car expense deductions with the average costs of operating a motor vehicle.
Medicare Levy Thresholds
The Medicare levy low-income thresholds will increase for singles, families and single seniors and pensioners from the 2014‑15 income year. The increases are intended to take account of movements in the Consumer Price Index so that low‑income taxpayers generally continue to be exempted from paying the Medicare levy.
The new thresholds will be as follows:
- For individuals, the threshold will be increased to $20,896 (previously $20,542)
- For families, the threshold will be increased to $35,261 (previously $34,367).
- The families income threshold will be increased by $3,238 (previously $3,156) for each dependent child or student.
- For single seniors and pensioners, the threshold will be increased to $33,044 (previously $32,279).
Higher Education Loan Programme (HELP) – Recovery from Overseas Debtors
The Government is extending the HELP repayment framework to debtors residing overseas.
HELP debtors residing overseas for six months or more will be required to make repayments of their HELP debt if their worldwide income exceeds the minimum repayment threshold at the same repayment rates as debtors in Australia.
The new arrangements will apply from 1 January 2016 for new and existing debts. Debtors going overseas from that date will have to register with the ATO. Those already overseas will have until 1 July 2017 to register. Repayment obligations will commence on 1 July 2017.
Zone Tax Offset to Exclude ‘fly-in fly-out’ and ‘drive-in drive-out’ Workers
From 1 July 2015, the Government will exclude ‘fly-in fly-out’ and ‘drive-in drive-out’ (FIFO) workers from the Zone Tax Offset (ZTO) where their normal residence is not within a ‘zone’.
The ZTO is a concessional tax offset available to individuals in recognition of the isolation, uncongenial climate and high cost of living associated with living in identified locations. Eligibility is based on defined geographic zones.
Currently, to be eligible for the ZTO, a taxpayer must reside or work in a specified remote area for more than 183 days in an income year. According to the Government, it is estimated that around 20% of all claimants do not actually live full-time in the relevant zone. Many of these are FIFO workers who do not face the same challenges of remote living that the ZTO was designed to address.
Those FIFO workers whose normal residence is in one zone, but who work in a different zone, will retain the ZTO entitlement associated with their normal place of residence.
Removing the Income Tax Exemption for Government Employees Working Overseas
The Government will remove an income tax exemption that is currently available to government employees who earn income while delivering Official Development Assistance (ODA) overseas for more than 90 continuous days.
This measure will take effect from 1 July 2016.
According to the Government, this measure will remove the inconsistent taxation of government employees delivering ODA overseas by ensuring that their foreign earnings are treated as assessable income in Australia.
Australian Defence Force and Australian Federal Police personnel and individuals delivering ODA for a charity or private sector contracting firm will maintain eligibility for the exemption.
Tax Residency Rules for Temporary Working Holiday Makers
The Government intends to change the tax residency rules so that most people who are temporarily in Australia for a working holiday are treated as non-resident for tax purposes, regardless of how long they are in Australia. As a result, affected taxpayers will be taxed at 32.5% from their first dollar of taxable income.
Under the current tax residency rules, a working holiday maker can be treated as a resident for tax purposes if they satisfy the residency tests; typically, that they are in Australia for more than six months. This means that currently these taxpayers are able to access the tax-free threshold of $18,200, the low income tax offset and the lower marginal tax rate of 19% for taxable incomes between $18,201 and $37,000.
The measure will apply from 1 July 2016.
Child Care Measures
The Government announced a child care package, which includes the following measures:
New Child Care Subsidy
A new single Child Care Subsidy (CCS) will be introduced from 1 July 2017.
The CCS will replace the current child care fee assistance provided by the Child Care Benefit, Child Care Rebate and the Jobs, Education and Training Child Care Fee Assistance payments which will cease on 30 June 2017.
Under the CCS:
- Families meeting the activity test with annual incomes up to $60,000 (2013-14 dollars) will be eligible for a subsidy of 85% of the actual fee paid, up to an hourly fee cap.
- The subsidy will taper to 50% for eligible families with annual incomes of $165,000.
- The CCS will have no annual cap for families with annual incomes below $180,000. For families with annual incomes of $180,000 and above, the CCS will be capped at $10,000 per child per year.
- The income threshold for the maximum subsidy will be indexed by the CPI with other income thresholds aligned accordingly.
- Eligibility will be linked to a new activity test to better align receipt of the subsidy with hours of work, study or other recognised activities.
- The hourly fee cap in 2017-18 will be set at $11.55 for long day care, $10.70 for family day care, and $10.10 for outside school hours care. The hourly fee caps will be indexed by CPI.
Note: In 2017-18, the family income thresholds will be $65,710 (maximum subsidy), $170,710 (minimum subsidy) and $185,710 (application of the annual cap of $10,000). The annual cap will be indexed by CPI from 1 July 2018.
Interim Home Based Carer Subsidy Programme
A new Interim Home Based Carer Subsidy Programme will subsidise care provided by a nanny in a child’s home from 1 January 2016.
The pilot programme will extend fee assistance to the parents of approximately 10,000 children. Families selected to participate will be those who are having difficulty accessing child care with sufficient flexibility (eg. nurses, shift workers, police, etc.).
Support for families will be based on the CCS parameters, but with a fee cap of $7.00 per hour per child.
Child Care Safety Net
The Government will provide additional funding from 2015-16 to provide targeted support to disadvantaged or vulnerable families to address barriers to accessing child care. The assistance will be provided through the Child Care Safety Net, which consists of three programmes:
- Additional Child Care Subsidy (ACCS): The ACCS will provide additional assistance to supplement the Child Care Subsidy for eligible disadvantaged or vulnerable families.
- Inclusion Support Programme (ISP): The new ISP will assist families with children with additional needs to access child care. The ISP will provide more funding for services to get the necessary skilled staff and equipment to support children with special needs.
- Community Child Care Fund (CCCF): The CCCF will provide grants to child care services to improve access to child care in disadvantaged communities, increase the supply of child care places in areas of high demand and low availability, and improve affordability for low income families in areas where the average fees are greater than the CCS fee cap.
Immunisation Requirements for Access to Government Payments
The Government will ensure that children fully meet immunisation requirements before their families can access certain Government payments.
From 1 January 2016, families will no longer be eligible for subsidised child care or the Family Tax Benefit (FTB) Part A end-of-year supplement unless their child is up-to-date with all childhood immunisations.
Exemptions will apply only for medical reasons.
The Government will amend parental income testing arrangements to provide more support for families with dependent young people who qualify for certain income support payments, including Youth Allowance, ABSTUDY Living allowance (ABSTUDY), and the Assistance for Isolated Children Scheme.
From 1 January 2016:
- Families with dependent children receiving income support payments would be subject to the Parental Income Test arrangements currently in place for FTB Part A and will no longer be subject to the Family Assets Test or Family Actual Means Test.
- Where a family has a dependent child who receives an individual income support payment and younger siblings who qualify the family to receive FTB Part A, a single Parental Income Test will be applied taking into account all income support benefits the family receive.
From 1 January 2017
- A Maintenance Income Test will be introduced for dependent children receiving individual income support payments. This test will apply to that child only and not include other child support amounts provided in relation to other children in the family. This will be of particular benefit to rural and regional families whose children continue to study beyond Year 12.
Family Tax Benefit Part A – Reduced Portability
The Government will reduce the amount of time FTB Part A will be paid to recipients who are outside Australia.
From 1 January 2016, families will only be able to receive FTB Part A for six weeks in a 12 month period while they are overseas. Currently, FTB Part A recipients who are overseas are able to receive their usual rate of payment for six weeks and then the base rate for a further 50 weeks.
Portability extension and exception provisions which allow longer portability under special circumstances will continue to apply.
End of Family Tax Benefit Part A - Large Family Supplement
The government will cease payment of the additional FTB Part A Large Family Supplement from 1 July 2016. Families will continue to receive a per child rate of FTB Part A for each eligible child in their family.