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Tax

Medicare Levy – I have changed private health funds because they give a better rebate on extras such as dental. Am I excluded from paying the Medicare Levy if I have extras with a private health fund or do I need to have health insurance as well?

You will have to pay Medicare Levy regardless - all Australian Tax Payers do (it is 2%).

Please refer to the below link for additional information:
https://www.ato.gov.au/individuals/medicare-levy

If you do not have Private Hospital Cover as well, and you earn over $90,000 as a single, you will have to pay an additional Medicare Levy Surcharge of 1%. This amount increases to 1.5% if you earn more than $140,000.

Please refer to the below link for additional information:
https://www.ato.gov.au/individuals/tax-return/2015/tax-return/medicare-levy-questions-m1-m2/m2-medicare-levy-surcharge-(mls)

So, you should have the cover to avoid having to pay an extra 1% of your income as a tax (and possibly more depending on your income level as stated above).

Why do I need to pay PAYG income tax instalment when I also have to pay income tax at the end of the financial year?

PAYG income tax instalments are an estimate of your expected tax liability for the current financial year which the ATO calculates based on your previous years Income Tax liability. These are generally divided into quarterly instalments payable throughout the financial year and are used to reduce your anticipated Income Tax debt at the end of the financial year.

At the end of the financial year when you lodge your Individual Tax Return, the amounts of PAYG you paid throughout the year are taken into account and reduced off your overall tax debt. If however, you receive a lower tax bill than expected (eg. You paid more PAYG tax than what was required) you will receive the surplus funds back as a refund from the ATO.

Are there any additional deductions I can claim in my return to reduce my tax payable?

Normally tax deductions are expenses you can claim that are used or earning your income. In a normal work related situation you may be able to claim your car expenses if you use your car for work or a mobile phone or internet usage or iPad or other equipment for a home office. You may be able to claim hours used in a home office or other similar expenses. Depending on the industry you work in, there could be other expenses as well. For example, if you work in the sun in the construction industry you are able to claim sunglasses, hat, sunscreen and other things that protect your skin from the sun. For example, if you are an accountant you are able to claim memberships and other professional development expenses. If you are a Sales Person, you may be able to claim different sales training and other expenses. There can be other expenses you can claim but it depends on the industry you are employed in. We will discuss this with you to determine what is relevant in your circumstance.

When should I register for GST?

You are required to register for GST if your annual income exceeds $75,000. If your income exceeds a certain amount, which is generally $150,000-200,000 you must do quarterly instalments. If you have under $75,000 you are still allowed to register for GST, but you only have to do annual returns for your GST. The benefits of registering for GST are depending on your circumstances, but generally you can claim the 10% of expenses that you pay, where you pay GST you can collect it back however you must charge GST on the invoices and your income. Generally if you are providing services to a business that business can claim the GST back so they are not out of pocket. We sometimes recommend that you register for GST if you are in contracting or consulting where the business may need to seem like it earns more income because there is a general requirement that you must register for GST if you are over $75,000 so therefore your clients may be happier that you registered because of your size.

Why is my Self Managed Superannuation Fund (SMSF) required to pay PAYG income tax instalments?

Self Managed Superannuation Funds are similar to other tax payers that pay tax instalments each year and they have an income tax payable each year. Because the ATO and Federal Government want to collect their income tax as they go (hence the name Pay as you Go) they want to have it that they collect quarterly instalments of the amount of tax that is estimated for the current financial year. This is normally based on the previous years tax expense and divided by 4 to give a quarterly amount. PAYG income tax amounts can be varied down or varied up depending upon your circumstance. Generally if there has been a poor year of investment returns or there hasn’t been as much tax or superannuation contributions going into the fund, then we would recommend reducing the instalments.

Am I eligible to claim the medical expense tax offset?

The medical expense tax offset was an offset that was brought in to offset the cost of any medical expenses that you might have been out of pocket for. That included doctor, dentist, surgery, pharmacy costs, physiotherapy, chiropractic, optical and other related medical expenses where a medical practitioner has diagnosed or required that you do various things. The former Labour Government announced in 2013 that they were scrapping the medical tax offset unless it related to aged care or a major situation where you required daily or intense treatment. This then means from 2015 financial year onwards, you can’t claim the medical expense tax offset unless you were eligible in 2013 and 2014. Going forward from 30 June 2016 the medical tax offset is no longer available.

How can I take advantage of my Family Trust structure to save tax?

Family Trusts and trusts in general, are vehicles that can be used for a variety of reasons. A Family Trust is generally a discretionary trust, and the discretionary trust means that the trustee controls the trust and has the ability and discretion to determine who should be paid distributions on income, capital or other amounts. The trust is able to distribute to the beneficiaries, dividends to one beneficiary or capital gains to a different beneficiary or other trading income, share trading or other things. The structure is very flexible and sits in terms of best tax minimisation in a legal way. There are some pitfalls with trusts, in that you can’t distribute a loss. If you have a rental property for example and that is the only income or taxes in the family trust you can’t offset that back against the personal income of a beneficiary because there is no ability to distribute a loss. Family Trust you need more advice and assistance which relates to your circumstance as there are a number of fundamental items within a trust, such as a Trustee. For a family trust there is an appointor, a guardian, a settlor, then there’s the beneficiaries. We recommend you seek further advice before proceeding.

My employer has been deducting tax from my regular pay, so why am I still required to pay additional tax when I lodge my return at the end of the financial year?

There are a number of reasons you may have a tax bill even though you may be employed and a couple of those reasons could be as follows:

  1. Your employer may not have deducted enough tax. When you complete your Tax File Number Declaration Form for your employer, you have to nominate whether or not you are going to deduct tax using the tax free threshold. That means that if you have a second job you withheld tax at a higher rate. If you ticked you want to employer to withhold tax from 2 employers using the tax free threshold then you won’t have had enough tax withheld and therefore have a tax bill.
  2. You have asked the employer to withhold tax, but you haven’t asked them to withhold additional money for your health debt, Higher Education Loan Programs. So you may not have requested that.
  3. Your employer may have withheld sufficient PAYG however you may have other income that hasn’t been taxed. Such as interest income, dividends or you may have sold some shares and had a capital gain or you may have received another income from another source. If that money hasn’t been taxed then you will be charged with the tax liability.
When is my tax return due for lodgement?

If you are a client of AustAsia Accounting Services Pty Ltd and we prepare your tax return, generally your tax return is not due until the 15th May the year after the end of the financial year. For example, if the year ended 30 June 2015 your return is generally not required for lodgement until 15th May 2016. There are some exceptions to this rule, which are if you have a Self Managed Superannuation Fund and it’s the first financial year, that is due the 28th February following the end of year. If you a large tax payer that’s been nominated by the ATO then your tax return if you are a company, is due by 15th January following the end of the financial year. If you are an individual then it’s due by 31st March the year after the end of the financial year.

When is my BAS lodgement and payment due?

Generally your BAS is due at the end of each quarter and if you lodge your return yourself it’s due and payable by the 28th of the month following the year end of the period. For example, the period 1 January to 31 March then your BAS and payment is due by 28th April. If we as your tax agent help you prepare or lodge your return for you, then we have an extension for most clients to the 11th of the month, 2 months following. For example, the period 1 January to 31 March you would have to lodge and pay by the 11th May not the 28th April and in a number of instances we have an automatic extension by the ATO because we lodge electronically till the 25th May not 11th May. When we lodge we get an extra month of payment and lodgement date.

What expenses / payments can be paid from my Self Managed Superannuation Fund?

Self Managed Super Funds can only make payments of expenses that are related to the operation of the fund or fund expenses. For example, if there is a rental property owned by the Superannuation Fund and there may be a loan then the interest payments or loan payments, the expenses of that property and any related insurance or other costs that relate to the property are able to be paid. This includes things that relate to the improvement of the property or assets such as furniture or other items. The other types of expenses that are usually paid are the accounting, audits and other lodgement fees that occur each year or month, life insurance premiums, income protection premiums and other similar sort of expenses. Some expenses relating to your Binding Death nominations and Estate plans can also be paid from the fund because they relate to your debt benefits may be paid. Depending upon your personal situation in the event that you have a marriage split or family court dispute, sometimes those expenses may be paid such as legal fees or other costs out of the Superannuation Fund where there has been an agreement or Family Court Order that states it is enabled to be paid. There can be other some expenses or payments in various circumstances but they are very limited and depending upon your situation. Other payments that can be made are for investments such as buying shares or other assets for the Superannuation Fund. There are now strict rules on investments, which we have further information on under the Investment and Superannuation FAQs.