The government has finally legislated the tax cuts originally announced in the May 2016 Budget, so that the marginal tax rate of 37% now starts at $87,000.
The following are the rates for adult residents for the 2016/17 income year (i.e., from 1 July 2016).
Taxable income Tax on this income
0 – $18,200 Nil
$18,201 – $37,000 19c for each $1 over $18,200
$37,001 – $87,000 $3,572 plus 32.5c for each $1 over $37,000
$87,001 – $180,000 $19,822 plus 37c for each $1 over $87,000
$180,001 and over $54,232 plus 45c for each $1 over $180,000
The above rates do not include the temporary budget repair levy (due to expire on 30 June 2017), nor the Medicare levy of 2%.
The ATO has updated the tax tables and PAYG withholding tax schedules (and their online tax withheld calculator) to reflect these changes.
Superannuation changes passed by Parliament
The government’s extensive changes to the taxation laws regarding superannuation were passed by Parliament on 23 November 2016.
According to the Treasurer, Mr Scott Morrison:
“The superannuation reform package better targets tax concessions to make our superannuation system fair and sustainable, as the population ages and fiscal pressures increase.
“The reforms include the introduction of a $1.6 million transfer balance cap, which places a limit on the amount an individual can transfer into the tax-free earnings retirement phase and the introduction of the Low Income Superannuation Tax Offset”.
The amendments also include the following two new measures to provide more flexibility to help Australians save for their retirement:
- The removal of the ‘10% rule’, allowing anyone (including employees) to claim a deduction for personal contributions into superannuation from 1 July 2017 (which will particularly help contractors who also draw income from salary and wages); and
- The ability for individuals with superannuation balances below $500,000 to make ‘catch up’ concessional contributions from 1 July 2018 (allowing them to ‘tap into’ unused amounts of their contributions cap from prior years, which will help those with broken work patterns – the overwhelming number of whom are women – better save for their retirement).
Record keeping is critical if taking on the ATO
Here’s a great example of the importance of documentation and good record-keeping.
In a recent case before the Administrative Appeals Tribunal (AAT), amended assessments issued to a taxpayer by the ATO, which were based on the amounts of unexplained deposits to the taxpayer’s bank accounts (in some years, in the hundreds of thousands of dollars, in others, millions), have been largely upheld.
The total further tax claimed by the ATO was almost $4 million, and, on top of that, they imposed an administrative penalty of almost $2 million (imposed at the rate of 50% for recklessness).
The taxpayer was partially successful in proving that some of the amounts deposited into bank accounts held in his name were not assessable income.
In particular, the taxpayer was able to demonstrate that some of the deposits were reimbursements of amounts he paid in relation to a group of companies of which he was an investor, and some were transfers from one of his bank accounts to another.
However, in relation to many of the deposits to his bank accounts, he had no corroborative evidence as to what they represented.
Therefore, he failed to discharge his onus to prove the amounts should not have been included in his assessable income.
CONTACT THE PRACTICE FOR ALL YOUR TAX AND WEALTH CREATION QUESTIONS:
(03) 8888 4000 OR INFO@THEPRACTICE.COM.AU