Higher education does not come cheap…. I could have cried when I saw my latest HELP statement. Ouch!

If you have a HELP debt, you must start repaying that debt when your ‘repayment income’ is above the threshold for compulsory repayment.

The following rates and thresholds apply for the 2010-11 financial year:

Your HELP repayment income is made up of your taxable income, total net investment losses, reportable fringe benefits amounts, reportable super contributions and any exempt foreign employment income.

The ATO’s HELP repayment calculator can give you an estimate of your compulsory repayment.  This is automatically calculated when your tax return is processed.

The voluntary repayment calculator gives you an estimate of the benefit you’ll receive when you make a voluntary repayment towards your HELP debt.

The Medicare Levy is currently paid by taxpayers at a rate of 1.5% of taxable income.

Low income individuals or families might be eligible for an exemption or reduction from paying the Levy, based on family income.

The 2010-11 Medicare Levy Low income thresholds for individuals and families are outlined below:

Single Taxpayer

Threshold: If you are under the threshold amount, no Medicare Levy is payable.

Phase in: Medicare Levy is payable at 10% of the excess above the threshold.

1.5%: Once you have reached this income, the full 1.5% Medicare Levy applies to the entire amount of taxable income.

Families

DIY

If you are preparing your own tax return and wish to claim an exemption or reduction based on family income, you can do this at item M1 – just pop in the number of dependent children at label Y.

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 change the fringe benefit treatment of cars to remove the unintended incentive for people to drive their vehicle further than they need to, in order to obtain a larger tax concession.

Under the ‘statutory formula’ method, a person’s car fringe benefit is determined by multiplying the relevant statutory rate by the cost of the car. Currently, the sliding scale of rates provides an increased tax concession for salary-sacrificed or employer-provided vehicles that are driven further.

The Government will replace the current rates with a single flat rate of 20 per cent that applies regardless of the distance travelled.

This reform will only apply to new vehicle contracts entered into after 7:30pm (AEST) on 10 May 2011, and will be phased in over four years as shown below:

Compared to the current statutory rates, a single rate of 20 per cent will:

• increase the tax concession provided for vehicles driven less than 15,000 kilometres a year;
• maintain the current tax concession provided for vehicles driven between 15,000 and 25,000 kilometres a year; and
• decrease the tax concession provided for vehicles driven more than 25,000 kilometres a year.

People who use their vehicle for a significant amount of work-related travel will still be able to use the ‘operating cost’ (or ‘log book’) method to ensure their car fringe benefit excludes any business use of the vehicle.

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.

The Medicare Levy is not payable (or is payable at reduced rates) by individuals and families on low incomes and by certain pensioners.

From the 2010-11 income year, the Medicare levy low-income threshold will increase to $31,789 (up from $31,196) for couples, and to $18,839 (up from $18,488) for singles.

For families, the additional amount of threshold for each dependent child or student will also be increased to $2,919 (up from $2,865).

The increase in thresholds generally takes into account movements in the Consumer Price Index.

The Medicare levy low-income threshold for pensioners below Age Pension age will also be increased.  From 1 July 2010, the threshold will rise to $30,439 (up from $27,697).  This will ensure that pensioners below Age Pension age do not pay the Medicare levy when they do not have an income tax liability.

The Federal Treasurer, Mr Wayne Swan, presented the Gilliard 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.

UPDATED: Information for 2011 is available here.

For whatever reason, “low income tax offset” has been the most commonly searched for phrase on our main site and blog since they both began in 2007. 

So, what is it? Well, it’s a non-refundable tax offset. This means it can reduce your tax liability (sometimes to zero) but you won’t receive a refund of any unused portion.

This means that adult taxpayers do not pay tax until their income is above $15,000.

Simply put; it’s a use it or lose it offset.

For the 2009-10 year, the maximum low income tax offset (LITO) is $1,350.

This reduces by four cents in the dollar above $30,000 before eroding entirely at $63,750. 

Here’s how it looks:

If you are doing your own tax you don’t need to apply for the low income tax offset.

To be eligible for LITO, you must be a resident for tax purposes.

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.

EDIT: Refer to Medicare Levy Low Income Thresholds 2011 for the latest rates and how to claim this on your 2011 tax return.

The rate of the Medicare levy is 1.5% of taxable income.  In some cases, you may be exempt from the medicare levy or eligible for a reduction based on family income.

The Medicare Levy is not payable (or is payable at reduced rates) by individuals and families on low incomes and by certain pensioners.

Individuals

The 2009-10 Medicare Levy low-income thresholds for individuals are as follows:

_{1. No Medicare Levy is payable on taxable income at or below the threshold amount.}

_{2. Medicare Levy is payable at 10% of the excess over the threshold amount.}

_{3. The Medicare Levy of 1.5% applies to the entire amount of taxable income.}

Families

The Medicare Levy low-income threshold for families will be $31,196 (previously $30,025), and the additional amount of threshold for each dependent child or student will increase to $2,865 (previously $2,757).

As we head into the new financial year, I’ll be posting some of the most commonly searched for tax titbits… rates, rebates, deductions, etc.

When it comes to personal tax thresholds, the table you will use depends on whether you are considered a “resident for tax purposes” or not.

Resident Individuals

The following apply to residents for tax purposes for the 2009-10 financial year:

* Please note that the above table does not include the Medicare Levy of 1.5%.

**The tax-free threshold may be higher for people eligible for the low income tax offset, the Senior Australians Tax Offset and/or other rebates.

What’s changed?

The 15% upper threshold has increased from $34,000 to $35,000 (this will be bumped to $37,000 next year). The 40% marginal tax rate has been reduced to 38% (further decreasing to 37% next year).

Non-resident Individuals

The following 2009-10 rates apply if you are not a resident for tax purposes for the entire income year:

* Medicare levy is not payable by non-residents.

The luxury car tax (LCT) threshold is $57,180 for the 2009–10 financial year. The car limit for fuel efficient cars is $75,000.

A 33% LCT rate applies to most cars over these thresholds.

The maximum goods and services tax (GST) credit that can be claimed by clients that purchase a luxury car is $5,198. This applies regardless of whether the luxury car is fuel efficient or not.

A Failure to Lodge (FTL) penalty is an administrative penalty which the Tax Office can impose on a taxpayer for failure to lodge a return, statement, notice or other document on time.

The base penalty is $110 (1 penalty unit) for each 28 day period or part thereof. This is multiplied by a factor of two for medium taxpayers and a factor of five for large taxpayers.

Generally, the ATO won’t usually apply a FTL penalty to the late lodgment of income tax returns, activity statements, etc. if they result in a refund or nil result. However, the penalty can still apply (it’s really at the ATO’s discretion).

I have only seen one case of a taxpayer receiving a FTL despite their tax return ultimately being lodged and resulting in a refund. In this case, there was a history of late lodging, multiple years were outstanding and several demands for lodgment had gone ignored before the taxpayer took action. Needless to say, it does not help to compound the problem!

The FTL penalty rates for small taxpayers are:

0 – 28 days overdue = $110
29 – 56 days overdue = $220
57 – 84 days overdue = $330
85 – 112 days overdue = $440
113+ days overdue = $550

(a small taxpayer generally has a turnover under $1m).

A full table of these rates, including the penalties applicable for medium and large taxpayers, is available on our main website here.

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.

The general interest charge (GIC) is  a uniform interest rate imposed by the Tax Office where there is a late payment of a tax debt. It begins to accrue on unpaid amounts from the due date until the balance is paid in full.

GIC rates for the next quarter are typically announced two weeks before the start of that quarter. The following rates apply for the periods indicated:

**Although the GIC rate for January – March quarter has slightly decreased, the daily compounding rate has increased. The reason is that 2004 was a leap year and the daily rate for each quarter in 2004 was calculated by dividing by 366 instead of the usual 365.

To help pay for the Medicare health scheme, resident taxpayers are subject to a Medicare levy. The rate of the Medicare levy is 1.5% of taxable income. Most Australians will have to pay the Medicare levy. Generally, tax offsets do not reduce this levy. In some cases, you may be exempt from the medicare levy or eligible for a reduction based on family income.

Low Income Thresholds – Individuals

The Medicare Levy is not payable (or is payable at reduced rates) by individuals and families on low incomes and by certain pensioners.

The 2008-09 Medicare Levy low-income thresholds for individuals are as follows:

1 1. No Medicare Levy is payable on taxable income at or below the threshold amount.

2 Medicare levy is payable at 10% of the excess over the excess over the threshold amount.

3 The medicare levy of 1.5% applies to the entire amount of taxable income.

 Online Calculator

The Australian Taxation Office has an online Medicare Levy Calculator.
The calculator can provide an estimate of your Medicare
levy, taking into account any entitlement to a reduction or exemption.

In order to use the calculator you may need to know your taxable income, your spouse’s taxable income and if you are eligible for an exemption.

The benchmark interest rate for the fringe benefit tax year commencing 1 April 2009 has dropped to 5.85%.

This replaces the previous FBT year’s rate of 9%. The rate of 5.85% is used to calculate the taxable value of:

- a fringe benefit provided by way of a loan; and

- a car fringe benefit where an employer chooses to value the benefit using the operating cost method.

Source: TD 2009-10

The Student Financial Supplement Scheme (SFSS) was a voluntary loan scheme to help tertiary students cover their expenses while studying. The scheme ceased in December 2003. In the fifth year of the loan being taken out, the Tax Office takes responsibility for collecting the balance of the outstanding loan, which becomes an accumulated Financial Supplement debt.

You will be required to start repaying your SFSS debt when your repayment income is above the minimum threshold for compulsory repayment.

The following rates apply for the 2008-09 financial year.

* ‘Repayment income’ is the sum of the taxpayer’s taxable income plus any net
rental losses, total reportable fringe benefits amounts and any exempt foreign employment income.

Online Calculator

The Australian Taxation Office have an online Student Financial Supplement Scheme repayment calculator available from the ATO website. The SFSS repayment calculator provides you with an estimate of your compulsory SFSS repayment.

Your compulsory SFSS repayment amount is automatically calculated when your tax return is processed and is based on your repayment income.

More Information

 The Tax Office have put together a publication titled Repaying your Financial Supplement loan 2008-09.

This guide includes information on:

• Your financial supplement account
  Indexation
  Compulsory repayments
  SFSS debts and PAYG
  Voluntary repayments
  plus more

The Repaying your Financial Supplement loan 2008-09 publication can be viewed and downloaded in Portable Document Format (PDF) from the ATO website. to your own computer.

The Student Financial Supplement Scheme (SFSS) was a voluntary loan scheme to help tertiary students cover their expenses while studying. The scheme ceased in December 2003.

In the fifth year of the loan being taken out, the Tax Office takes responsibility for collecting the balance of the outstanding loan, which becomes an accumulated Financial Supplement debt.

You will be required to start repaying your SFSS debt when your repayment income is above the minimum threshold for compulsory repayment.

The following rates apply for the 2007-08 financial year.

* ‘Repayment income’ is the sum of the taxpayer’s taxable income plus any net rental losses, total reportable fringe benefits amounts and any exempt foreign employment income.

Online Calculator

The Australian Taxation Office have an online Student Financial Supplement Scheme repayment calculator available from the ATO website. The SFSS repayment calculator provides you with an estimate of your compulsory SFSS repayment.

Your compulsory SFSS repayment amount is automatically calculated when your tax return is processed and is based on your repayment income.

You can find rates for earlier years (way back to 1999-2000) from our main site SFSS Repayment Thresholds & Rates – earlier years.

Please note that different tables apply depending upon whether you are considered a resident for tax purposes. The tables below relate to the financial year ending 30 June 2009.

Resident Individuals

The following table of rates apply to resident individual tax payers for the 2008-09 financial year.

* Please note that the above table does not include the Medicare Levy of 1.5%.

** The tax-free threshold may be higher for people eligible for the low income tax offset, the Senior
Australians Tax Offset and/or other rebates.

Non-resident Individuals

The following rates apply to individuals who are not residents of Australia for tax purposes for the entire income year:

* Medicare levy is not payable by non-residents.

Please note that different tables apply depending upon whether you are considered a resident for tax purposes.

The tables below relate to the financial year ending 30 June 2008.

Resident Individuals

The following table of rates apply to resident individual tax payers for the 2007-08 financial year.

* Please note that the above table does not include the Medicare Levy of 1.5%.

** The tax-free threshold may be higher for people eligible for the low income tax offset, the Senior
Australians Tax Offset and/or other rebates.

Non-resident Individuals

The following rates apply to individuals who are not residents of Australia for tax purposes for the entire income year:

 * Medicare levy is not payable by non-residents.

 
You can find rates for earlier years (way back to 1999-2000) from our main site Personal Income Tax Rates – earlier years.

The Higher Education Loan Programme (HELP) was introduced in 2005, replacing the Higher Education Contribution Scheme (HECS).

You will be required to start repaying your HELP debt when your repayment income is above the minimum threshold for compulsory repayment. The following rates and thresholds apply for the 2008-09 financial year.

2008-2009

*HRI= Taxable income plus any net rental losses, total reportable fringe
benefits amounts and exempt foreign employment income.

Online Calculator

The Australian Taxation Office have an online HELP repayment calculator available at the ATO website. The HELP repayment calculator provides you with an estimate of your compulsory HELP repayment.

Your compulsory HELP repayment amount is automatically calculated when your tax return is processed and is based on your HELP repayment income.