Tax offsets and deductions
You may be entitled to the following tax offsets (rebates) and deductions for the year ended 30 June 2018.
Private health insurance offset
Depending on your income and age, you may be eligible for a tax offset of up to 35 per cent on your health insurance.
If you haven’t claimed a reduced premium from your health fund, then you can claim an offset in your tax return.
Spouse super contribution offset
If you made personal superannuation contributions on behalf of a spouse, there is a tax offset of up to $540 per year. This is available for spouse contributions of up to $3,000 per year, where your spouse earns less than $37,000 per year, and a partial tax offset for spousal income up to $40,000 per year.
Net medical expenses tax offset
You may be eligible for this tax offset until 30 June 2019, if you have out-of-pocket medical expenses relating to disability aids, attendant care or aged care.
Child care subsidy
From 2 July 2018, the Child Care Subsidy (CCS) replaces the Child Care Benefit and the Child Care Rebate. If you currently receive assistance with child care fees, you need to complete an online Child Care Subsidy assessment using your Centrelink online account through myGov. If you don’t need assistance with child care fees until after 2 July 2018, you can start claiming the CCS using your Centrelink online account through myGov after that date.
The CCS is calculated based on your family income. If your family earns $186,958 or less, you won’t have an annual cap on your CCS. If your family earns more than $186,958 and under $351,248, your CCS will be subsidized up to the annual cap of $10,190 per child each financial year. The CCS is not payable if your family income is $351,248 or more.
To be eligible, your child must meet immunisation requirements and be 13 or under and not attending secondary school unless an exemption applies.
Senior Australians pensioner tax offset
If you are eligible for the senior Australians pensioner tax offset (SAPTO) you are able to earn more income before you have to pay tax and the Medicare levy. In the 2017/18 financial year, you will pay no tax on an annual income less than:
- singles – $32,279 (a reduced offset applies to incomes up to $50,119)
- couples (each) – $28,974 (a reduced offset applies to incomes up to $41,790).
Super tax hints
Superannuation is a very tax-effective vehicle to save for retirement. Following are some tips to help you maximise your super.
For the 2017/18 financial year, non-concessional (or after tax) super contributions are capped at $100,000 per person per year or $300,000 over three years using the bring forward provisions, subject to your total super balance at 30 June the previous financial year. Concessional contributions, or those made with pre-tax money, are limited to $25,000 per person per year.
A salary sacrifice strategy allows you to make contributions to super from your pre-tax salary. Your salary is then reduced by the amount you choose to sacrifice. The benefits of this are two-fold: not only does your super balance increase, but this strategy could also reduce your taxable income and therefore the amount of tax you pay. Also, super contributions are concessionally taxed at just 15 per cent (up to 30 per cent for individuals with income over $250,000) instead of your marginal tax rate, which could be as high as 47 per cent.
Personal deductible contributions
From 1 July 2017, if you are eligible to contribute to super, you may make voluntary personal contributions and claim a tax deduction up to your concessional contribution cap. .
This gives you greater flexibility to top up your concessional contributions made by your employer, especially if your employer does not offer salary sacrifice. For instance, you can time your final contributions leading up to 30 June each year and make the most of your concessional contribution limits and the resulting tax benefits.
If you receive at least 10 per cent of your income from employment or self-employment and you earn less than $36,813, you may be eligible for the maximum super co-contribution of $500 from the Government for an after tax contribution to super of $1,000. The co-contribution phases out once you earn $51,813 or more.
The ATO uses information on your income tax return and contribution information from your super fund to determine your eligibility.
If you want to split your super contributions with your spouse, don’t forget this usually can only be done in the year after the contributions were made. Therefore, from 1 July 2018, you may be able to split up to 85 per cent of any concessional (or pre-tax) contributions you made during the 2017/18 financial year with your spouse.
Apart from making the most of your super, there are other ways you can minimise your tax liability.
Capital gains and losses
A capital gain arising from the sale of an investment property or shares and capital losses can be used to offset the capital gains. For example, you may have sold investments that were no longer appropriate for your circumstances and any capital losses realised as a result can be offset against any capital gains you have realised throughout the year. Unused losses can be carried forward to offset capital gains in future years.
Specialist advice should be sought before making changes to your investments.
If you have an investment loan you can arrange to prepay the interest on that loan up to 12 months and claim a tax deduction in the same year the interest was prepaid.
Negative gearing is another strategy used to manage tax liabilities. Geared investments use borrowed funds to enable a higher level of investment than would otherwise be possible. Negative gearing refers to the cost of borrowing exceeding the income generated by the investment. This difference is an allowable tax deduction. If you invest in shares, you may obtain imputation credits which can be used to further reduce the amount of tax you pay.
Income protection insurance
If you hold an income protection policy in your name, then any premium payments you make are tax deductible.
Tax rates for 2017/18
Note: Medicare levy of 2 per cent will also apply where applicable.
Individual tax rates for the year ended 30 June 2018
Up to $18,200
$18,201 to $37,000
19% of the portion over $18,200
$37,001 to $87,000
$3,572 + 32.5% of the portion over $37,000
$87,001 to $180,000
$19,822 + 37% of the portion over $87,000
$54,232 + 45% of the portion over $180,000