A new Bill has been introduced into parliament to establish a payroll tax rebate scheme which is intended to encourage the employment of people with disabilities (as opposed to the general dis-incentive payroll tax offers for employing people).

The Payroll Tax Rebate Scheme (Disability Employment) Bill 2011 will provide employers with a payroll tax rebate of up to $4,000 per eligible employee.

The $4,000 rebate will be paid in 2 equal instalments – $2,000 after 3 months of employment and a further $2,000 after 6 months of employment.

Eligible workers are new employees that have completed the Family and Community Services funded Transition to Work program and are working a minimum of 12 hours a week, on average.

More information on how to apply for this rebate will be available later in the year and so we’ll keep you updated.

The recent spate of “get private health cover before 30 June or get taxed” campaigns really irritate me. I have nothing against Private health Cover and if you’re likley to be up for the Medicare Levy Surcharge (MLS), you should look into it.

What bugs me is that unless you read the itty-bitty fine print on the bottom of screen, you may not realise that even if you got approriate cover on 29 June, you’ll still have to pay the MLS for the other 364 days of the year you did not have it.

They don’t make that fact crystal clear – in fact, the whole campaign implies that there is an urgency to get it then (ads running during June) in order to avoid this additional penalty that financial year.

It’s then up to the accountant to explain this concept to you. You try to tell the accountant, “But I rushed out to purchase it because the ad said….”  

Are you really going to accept tax advice based on nothing but a 30 second television commercial? Always read the fine print or check with a tax professional if you’re uncertain (preferably not the company who is trying to sell you the product).

If you did rush out and grab it during June, it’s not a bad thing. You won’t be taxed MLS for the days you were covered and, if you keep it up, you won’t have to worry about the surachge at all next financial year. 

Just don’t abuse your accountant if you didn’t get health cover until June and are liable to pay a portion of the surcharge for the preceding days in the financial year.

Last year the post titled Low Income Tax Offset for 2010  proved to be one of the most popular topics. With Tax Time just around the corner, it’s time we update that information and take a look at LITO for 2011.

This year, adult taxpayers do not pay tax until their income is above $16,000.

I’ve prepared a short video in order to explain LITO for the 2010-11 year, including examples on working out your entitlement.

See the video below or scroll down to get right to the facts.

For the 2010-11 year, the maximum low income tax offset (LITO) is $1,500.

This reduces by four cents for every dollar of taxable income above $30,000. It erodes entirely at a taxable income of $67,500.

Here’s how it looks:

To be eligible for LITO, you must be a resident for tax purposes and have a taxable income below the cut-off threshold.

There is nothing you need to fill in on your tax return to apply for the Low Income Tax Offset. The ATO will automatically apply this offset to your assessment for you if you’re entitled to it.

If you have any questions, simply post a comment below and I’ll get back to you as soon as I can. 

I’m hoping to cover one offset or entitlement each weekend for the next couple of months. If you have any suggestions on what you want to see featured next, don’t be shy about letting us know!

The Government will phase out the tax offset for dependent spouses currently aged less than 40 to help encourage more Australians into paid employment.

This reform will mean that from 1 July 2011 taxpayers with a dependent spouse born on or after 1 July 1971 will no longer be eligible for the dependent spouse tax offset (DSTO). This means the DSTO will be gradually phased out as the population ages.

Dependent spouses with children are not affected by this measure because they are eligible for Family Tax Benefit B rather than the DSTO.

The change will also not affect taxpayers whose dependent spouse is a carer, who is an invalid or permanently unable to work; and taxpayers eligible for the zone, overseas forces or overseas civilian tax offsets.

This change recognises that dependent spouses who may have been out of the paid workforce for many decades would find it more difficult to find jobs, so they will continue to be eligible for the DSTO.

This reform to the DSTO forms part of the Government’s Building Australia’s Future Workforce package.

The Federal Treasurer, Mr Wayne Swan, presented the Gillard Government’s budget on 10th May 2011. None of the items contained within the budget will become law until they have been passed by the House of Representatives and the Senate, and signed by the Executive Council.

Measures to bring forward low income tax offset (LITO) relief to 6.5 million low income taxpayers will be annouced in tomorrow nights budget.

From 1 July 2011, the Government will increase the proportion of the low income tax offset (LITO) that is delivered through workers’ week-to-week pay packets from 50% to 70%. This change means instead of being compensated after they put in their tax return at the end of the year, lower income earners are taxed less during the year.

Someone with annual income of $30,000 will get an extra $300 during the year in their regular pay (around $5-$6 each week). A person’s total LITO entitlement for any one tax year will remain unchanged.

The measure is designed to increase workforce participation and help with cost of living pressures. 

With just one day to go until the Federal Budget is announced, what is it you hope to see introduced or dropped?

If you are operating a company with a turnover under $5M and with expenditure on research and development from $20,000 to $2M in aggregate, then the company can claim a tax rebate of 37.5% (or possibly 52.5% on some component) of the R & D expenditure incurred during 2009/10.

If the company’s turnover is over $5M and the company has undertaken research and development projects exceeding $20,000 in aggregate during 2009/10, the company can claim a tax deduction of 125% (or possibly 175% on some component) of the R & D expenditure incurred during 2009/10.

To claim these benefits the company must register with AusIndustry prior to 30 April 2011 or the date of lodgement of the company’s income tax return.  

To be eligible to claim the research and development expenditure, the company should have prepared a research and development plan for each research and development project and to have kept costs and manpower allocation records to substantiate the research and development claim.

For further details regarding the operation of the research and development laws, contact your accountant or give our office a call on 1300 35 22 35.

Well you all might have seen the new government advertisements on the Education Tax Refund and as a new school year is almost upon us it’s time to revisit what, how and who can claim the Education Tax Refund.

The Education Tax Refund (ETR) helps parents and carers claim up to 50% back on some of those school expenses.

For the 2010-2011 tax year, refunds of up to $397 for every primary school child and $794 for every secondary school child are available.    

Am I eligible?

In general terms, you are entitled to claim the ETR if you care for a child and receive

• Family Tax Benefit Part A, or
• You would have received FTB A if not for another payment made for the child (including youth allowance and others listed below for independent students).

 Independent students can also claim provided they meet certain schooling, residency, age requirements and receive a benefit such as 

• Youth Allowance
• Disability Support Pension
• ABSTUDY Living Allowance, or
• the Veterans’ Children Education Scheme

 What can I claim?

You can claim the cost of buying, establishing, repairing and maintaining any of the following items:

•  Home computers & laptops
•  Printers, USB flash drives, disability aids for use of computers
•  Computer repairs
•  Home internet connections
• Computer software for education use
• School textbooks and other printed learning material
• Stationery and printer inks
• Prescribed trade tools (Secondary students)

No uniforms yet, folks.

 School uniforms will not be claimable until the 2011-12 financial year and that is subject to legislation. This means that uniforms purchased after 1 July 2011 might be eligible for the ETR but don’t count on it just yet.

How do I get it?

To claim the ETR you need to lodge a tax return or if you do not need to lodge a tax return you can fill in a Education Tax Refund for Individuals claim form available from the Australian Taxation Office or through a registered Tax Agent.

Don’t forget to keep all your receipts!

By the looks of things, the low income tax offset post is still the most sought after information on the site.  

LITO is one of the easiest offsets to actually calculate and, as opposed to most other rebates, the Tax Office will even calculate and apply it for you.

What about all of those other offsets? Do you know what they all are? And how to maximise your your entitlement and claim them? If you’re anything like the hundreds of taxpayers we’ve met this tax season already, the answer is probably no.   

I’m thinking that a series on the various tax offsets might be in order.

Tell me, is this just too boring for words or would you suffer  through it in order to save those tax dollars? I’d love to hear your thoughts.

With back-to-school time upon us again, families are encouraged to hang onto those receipts to take advantage of the Education Tax Refund (ETR).

Figures from the Australian Taxation Office (ATO) have revealed that only half of all eligible Australian families have lodged a claim, leaving more than $500 million in unclaimed benefits.

The ETR provides parents with much-needed help for education expenses, with refunds of up to $375 per primary school student and $750 per secondary school student.

That means a family with two kids in high school and one in primary school could potentially get a refund of almost $2000 on eligible education expenses.

DID YOU CLAIM YOURS?

According to the ATO only $488 million of the projected $1.02 billion cost has been claimed in tax refunds. The average amount claimed for primary school students was $246.99 while the average for secondary school students is $495.73. That’s not a bad refund for doing nothing but keeping tabs on the expenses incurred.  

Taxpayers still have until March-April 2010 to claim out of pocket education expenses for the 2009 school year, if they lodge their individual tax returns through a tax agent.

Back to school expenses that parents can claim include the cost of buying, establishing, repairing and maintaining any of the following items:

• - school textbooks and other printed learning material, including prescribed textbooks, associated learning materials, study guides and stationery;
• - prescribed trade tools for secondary school trade courses;
• - laptop computers and home computers;
• - computer-related equipment such as printers, USB flash drives, as well as disability aids to assist in the use of computer equipment for students with special needs;
• - home internet connections; and
• - computer software for educational use.

Families can claim the ETR if they have eligible education expenses and received Family Tax Benefit (FTB) Part A for the child that the expenses relate to.

Families are also eligible if they have children in primary or secondary school who would be eligible for FTB Part A purposes, but for the fact that the child receives certain payments or allowances, including:

•  
  • - Youth Allowance;
  • - Disability Support Pension;
  • - ABSTUDY Living Allowance;
  • - the Veterans’ Children Education Scheme;
  • - Student Financial Supplement Scheme; and
  • - the scheme to provide education and training under s258 of the Military Rehabilitation and Compensation Act 2004.

The Tax Office sure are fond of online calculators. The latest addition to the ATO’s online toolbox is the Education Tax Refund Calulator.

The Education Tax Refund (ETR) is available to you whether or not you are required to lodge a full tax return – it’s a refundable tax rebate.  

If you’re eligible, you can claim back certain education costs of up to $375 for each primary school child and up to $750 for each secondary school student.

This is the first year the ETR has been in effect and so there is still some confusion among taxpayers we’re seeing over what is and is not a claimable expense. For a listing of the types of items that are eligible and those that are not, you might like to take a look at over Education Tax Refund page.

Take it for a spin and tell us what you think (I haven’t used it myself). Try the ATO Education Tax Refund Calulator.

Tax time is in full swing around here with workers eager to get the ball rolling on their tax refunds. One area we’re seeing a lot of taxpayers still need reminding about is the net medical expenses tax offset. Often a few key questions reveals a person would be able to claim this offset and either had never considered it before or had failed to keep track of the household medical costs.

How much can you claim?

This tax offset allows you to claim 20% of your out-of-pocket medical expenses once you reach the $1,500 threshold. That’s 20 cents back for every dollar you spent over $1,500 and it can really add up. You don’t have to have spent the whole $1,500 for yourself either. The threshold can be reached by the combined medical expenses of yourself and all of your dependants who are residents for tax purposes.

What’s a medical expense?

Medical expenses can include things like visits to your doctor, stays in hospital, x-rays, optical, dental, referred physio, prescription medications and even some counselling services.Your tax agent will be able to advise you whether or not a particular expense can be included. You cannot claim for over-the-counter medications or cosmetic procedures, for instance.

Real Example

If you have children or are on regular medications, it’s frightening just how quickly these medical costs can accrue. Being able to recover some of these expenses in the form of a tax offset is well worth the effort.  As I was writing this post I decided to check our own household out-of-pocket medical for last year. We have three children. Between doctors, glasses, dentist and scripts we had $8,353 unreimbursed (this doesn’t include any amount received back from Medicare or private health… the offset works purely off your actual out-of-pocket expenses). Our tax offset on this amount was a lovely $1,370. That’s calculated as [8,353 - 1,500] x 20%. As offsets directly reduce tax liabilty, this was a tax saving of over $1,300 right there!

How do I get the information I need?

If you are using the services of a registered tax agent, they are able to obtain details of any medical claims processed through Medicare (this will also be available to self-preparers using the ATO’s etax) to determine your gaps for the financial year. If you tend to use the same pharmacy for your prescriptions, you can pop in and ask them for a print out of your script purchases for the tax year. Most chemists are used to this around tax time and willing to oblige.

Start tracking those medical expenses NOW in preparation for next year!  

The non-refundable Mature Age Workers Tax Offset (MAWTO) was introduced to encourage taxpayers to remain in the workforce. To qualify, you must be a resident for tax purposes, be aged 55 or more at the end of the income year and have received net income from working.

The rates for 2008-09 have not changed from previous years. The maximum offset is still $500 for workers earning between $10,000 and $53,000 (if you earned under $10,000, the offset will be 5% of your income). The maximum rebate starts to decrease at $53,000 and cuts out altogether at $63,000.

If you are eligible, you will receive the benefit of the offset when you lodge your 2008-09 income tax return. You do not need to calculate the mature age worker tax offset. The Tax Office will apply the calculation for you based on information you provide in your tax return.

For more information on the Mature Age Worker Tax Offset, including more detailed information on ‘net income from working’, see the Tax Office MAWTO Overview.

I hope you held onto those back-to-school receipts like we reminded you because it’s time to get some money back. If you’re eligible for the education tax refund you’ll be able claim it in your 2008–09 tax return.

The Education Tax Refund can help with primary and secondary school costs and is a refund of up to $375 for each primary school child’s eligible education expenses and up to $750 for each secondary school student’s eligible education expenses.

Even if you don’t need to lodge a full tax return, you can still claim the refund by lodging the claim form with the Tax Office.

Am I eligible?

If you receive family tax benefit part A for children at school you are eligible. If another payment prevents you receiving family tax benefit part A for a child, for example Youth Allowance, you may still be eligible.

Where parents or guardians have shared care of a child, the percentage of the education tax refund available to you is the same as your shared care percentage for family tax benefit part A.

What can I claim?

If you’re eligible, you’ll receive 50% of the cost on your child’s education expenses for items such as laptops, home computers, printers, paper, software and the internet, up to the maximum refund amount. Textbooks, study guides and stationery like pens and pencils can also be claimed.

You can also combine the education expenses of all your eligible children as long as they all have access to the purchased items — for example a computer.

Costs for school fees, school uniforms, excursions, bus and train fares, musical instruments and sporting equipment can’t be claimed.

You need to meet four conditions to be eligible for the senior Australians tax offset (SATO). These conditions relate to factors such as age, income, and eligibility for Australian Government pensions and similar payments.

Generally, it is available to a taxpayer who:

- Was at or above age pension age at 30 June 2009:

- Receives the Commonwealth age pension or a Department of Veteran Affairs payment during the income year (or would have received it if a claim were made or the asset test was satisfied).

- Was not in prison at any time during the year.

- Has taxable income under the cut-out threshold (see table below).

The following shade-outs and cut-offs apply for the 2008-09 financial year.

The ATO have a Senior Australians Tax Offset Calculator available online. The calculator will help you work out whether you are eligible for SATO, calculates the amount of your offset and takes into account a transfer of your spouse’s unused senior Australians or pensioner tax offset.

More detailed information is available from the Tax Office web site on each of the four conditions you must meet to be eligible for the senior Australians tax offset.

An increase to the Low Income Tax Offset (LITO) was announced in the 08/09 Federal Budget. For the 2008-09 income tax year, the maximum offset is $1,200. This amount reduces by four cents in every dollar of taxable income above $30,000 until it erodes entirely at $60,000.

Adult taxpayers eligible for the full LITO will not pay tax until their taxable income exceeds $14,000 (up from $11,000). It’s now $2,267  for a child under 18.

LITO can only reduce your tax liability to zero and so any unused portion is not refundable or transferable. To qualify for the low-income tax offset, you must be a resident for tax purposes. The Taxation Office have an online Low Income Tax Offset calculator. The 08-09 year is not yet functional from the calculator at the time of writing but I expect it will be come 1 July. The calculator will help you work out whether you are eligible for the LITO and calculates the amount of your offset if your taxable income is less than the low income tax offset threshold.

If you’re doing your own tax, you don’t need to apply for the low income tax offset on your return. The Tax Office will calculate and apply any LITO entitlement for you.

Many Centrelink payments are assessable for income tax purposes and need to be included on your tax return – not all of them but that’s a post for another day. If you receive a taxable government payment you may be entitled to a tax offset called the beneficiary tax offset (BTO).

This offset kicks in once you’ve reached more than $6,000 of an assessable government payment in a financial year. It’s likely you will also receive the Low Income Tax Offset (yes, you can get both).

As I’ve stated before, most offsets can only reduce your tax liability. It will not reduce your medicare and it is not a cash refund but it will help to reduce any tax you might otherwise pay.

How do I ensure I receive this?

If you prepare your own tax, you must enter the payment you receive at the correct item on your tax return. You’ll notice there are separate income sections for putting in things like Salary & Wages, Government Allowances and Government Pensions. The Tax Office will calculate your offset for you based on this information so be sure it goes in the right place.

How much is it?

Most people will have taxable benefits under $30,000. This entitles them to a 15% offset for every dollar above $6,000 in eligible benefits. As an example, if I received just $15,000 in Newstart my Beneficiary Offset would be $1,350.

What payments and allowances qualify?

The following list shows the payments and allowances that qualify for the beneficiary tax offset:

• Parenting payment (partnered)
• Newstart allowance
• Youth allowance
• Mature age allowance
• Partner allowance
• Sickness allowance
• Special benefit
• Widow allowance
• Austudy payment
• Exceptional circumstances relief payment or farm help income support
• Interim income support payment
• Cyclone Larry or Cyclone Monica income support payment
• Education payment of any of the following and you were 16 years or older
• ABSTUDY living allowance
• payment under the Veterans’ Children Education Scheme
• payment under the Military Rehabilitation and Compensation Act Education and Training Scheme 2004 – shown as ‘MRCA Education Allowance’ on your PAYG payment summary – individual non-business
• Training for Employment Program allowance; New Enterprise Incentive Scheme allowance; textile, clothing and footwear special allowance; Green Corps training allowance; or other taxable Commonwealth education or training payments
• Income support component from a Community Development Employment Project (CDEP) – shown as ‘CDEP salary or wages’ on your PAYG payment summary – individual non-business
• CDEP scheme participant supplement
• Northern Territory CDEP transition payment
• Equine workers hardship wage supplement payment.

Parents should ‘keep their receipts’ for education expenses in light of the proposed commencement of the Education Tax Refund from 1 July 2008. Under the ETR, eligible families will be able to claim:

? a 50 per cent refundable tax offset every year for up to $750 for each child undertaking primary school, (that is, a refund of up to $375 per child, per year);

? a 50 per cent refundable tax offset every year for up to $1,500 for each child undertaking secondary school (that is, a refund of up to $750 per child, per year).

Generally, you are entitled to the ETR if you get Family Tax Benefit (Part A) for the child you wish to claim for. Also, eligibility is extended to parents who would be entitled to FTB Part A but for the fact the child receives other payments such as Youth Allowance. 

The refundable tax offset will apply to expenses incurred from 1 July 2008 and will be claimed upon lodgement of a 2008–09 income tax return.

Eligible families will be able to recoup the cost of purchases including:

·         laptops;

·         home computers and associated costs;

·         home internet connection;

·         printers;

·         education software;

·         trade tools for use at school;

·         school text books; and stationery.

Eligible expenses are for items that support a child during school and improve the quality of education.

You can download an ETR Fact Sheet from the Treasury website at this page or simply email me (christie at lewistaxation.com.au) and I’ll email one off to you.

From 1 July 2008, families who receive FTB Part A with children in primary or secondary school will be able to claim a refundable tax offset for eligible education expenses. The offset will be claimed through the individual tax return for the relevant income year.

Eligible expenses would appear to include laptops, education software, text books, etc. I’ll be very interested to read the fine print concerning these items.

Eligible parents will be able to claim the following:

• A 50% tax offset each year for up to $750 for each child attending primary school (maximum of $375 per child per year).
• A 50% tax offset each year for up to $1,500 for each child attending secondary school (maximum of $750 per child per year).

From 1 July 2008, the Child Care Tax Rebate (CCTR) will increase from 30% to 50%. Currently this payment is made annually through Centrelink to cover out-of-pocket childcare expenses.

The maximum value of the claim will increase from $4,354 per child to $7,500 per child per year.

The payment frequency of the CCTR is set to change also and will be made quarterly to help with the expense as it is incurred.