2007/08 Key Tax Changes

2007/08 Key Tax Changes

End of financial year tax help & tax tips - 2007/08 key tax changes

  • From July 1, marginal tax rates will be cut, with the top rate of 46.5% (including the Medicare Levy) applying only to income exceeding $180,000. More importantly, the threshold at which the 31.5% marginal rate cuts in is being lifted from $30,001 to $34,001.

  • The Low Income Tax Offset increase from $750 to $1,200 from July 1. This means you won’t pay any tax until income exceeds $14,000.

  • Medicare Levy Surcharge – singles earning up to $100,000 and couples earning up to $150,000 should rethink whether they need private health insurance.

  • FBT needs to be reviewed for anyone moving into lower tax rate as FBT is levied at the highest marginal rate of 46.5%.

  • Personal superannuation contributions changes – There is no limit on the amount of the deduction as the age-based limits which applied in pre-2007/08 years has been abolished.

  • Concessional contributions such as salary sacrifice, compulsory super and personal tax-deductible contributions are now limited to $50,000 a year, though a $100,000 transitional limit applies until 2012 for those aged 50 or more.

  • Means tests – From July 1 next year, salary sacrificed into super and net losses on rental property and financial investments will be included in the mean tests for a range of Government benefits.

  • Introduction of first home saver’s account. Available from October 1, will provide a 17% government co-contribution for the first $5,000 saved each year.

  • Children under 18 to receive more “unearned income” – such as investment or trust distributions. From July 1, the effective tax-free threshold on this income will rise from $1,666 to $2,666.

  • Lifting the child-care tax rebate from 30% to 50%.

  • Child care rebate is no longer paid through tax system but is instead separately calculated and paid by the Family Assistance Office.

  • Introduction of a 50% refundable tax offset for eligible education expenses for school children. The maximum refund will be $750 a year for each primary school children and $1,500 for each child in secondary school. Parents will need to start keeping receipts to get the refund.

  • The rule on family trusts will be tightened from July 1, to restrict the number of people you can include as family when making a family trust election. Under the new rules, “family” will include only children or grandchildren of the test individual or the spouse, and a trust will no longer be able to make a one-off variation to the test individual, except in the case of marriage breakdown.

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