Accounting & TaxesNews & Opinion

Tax Planning – Opportunities Specific To 2014-15

What is changing?


There are a number of rate changes that will come into force at 1 July 2014. The most high profile change is the Budget Repair Levy which will add 2% to the top marginal tax rate. However, there are also increases to the Medicare Levy and changes to the medical expenses tax offset.


Personal Tax Rates going up


2013-14 2014-15
Taxable Income Tax Rate (%) Tax rate (%)
$0 – $18,200 0 0
$18,201 – $37,000 19 19
$37,001 – $80,000 32.5 32.5
$80,001-$180,000 37 37
$180,001 + 45 47*


*Includes debt levy of 2% announced in the recent Federal budget.


Medicare Levy Rates going up


2013-14 2014-15
Levy Rate (%) Levy rate (%)
1.5 2.0


Medical expenses tax offset


The medical expenses tax offset is being phased out between now and 2019. To keep things interesting, there are two sets of transitional rules in place:


1. The tax offset will continue to be available throughout the transitional period in relation to medical expenses for disability aids, attendant care or aged care.

2. If you received the tax offset in the 2013 year you will be eligible to claim the full range of medical expenses in the 2014 year. If you again receive the tax offset in the 2014 year, you will also be eligible to claim the full range of medical expenses in the 2015 year.


What are the opportunities?


  • Like always, decisions that come under the heading of tax planning need to first make sense on a practical level. In other words, don’t make decisions based only on the tax outcomes.


  • Given that tax and Medicare rates are set to rise, some taxpayers will benefit from bringing income to account (e.g. bonuses) or holding over deductible expenditure (e.g. super contributions) in the current tax year whilst the lower rates prevail. This will require careful consideration of your specific circumstances since ordinarily, we are aiming to defer tax so you hang onto your money for longer.


  • Taxpayers that are operating their own business may wish to cap their earnings in 2015 to ensure they don’t earn more than $180,000.


  • Taxpayers may prefer to borrow money from their private company in 2015 rather than take every dollar as wages. Once again, care needs to be taken to comply with tax rules relating to private company loans.


  • ighHHigh income earners may wish to take another look at negative gearing. The ‘tax contribution’ has effectively been increased by these rate increases. Our view is that negative gearing is a legitimate wealth building strategy and undoubtedly has its place, however, it is considerably less attractive than positive gearing!


  • If you received the Medical Expenses tax offset in 2013 and you are a chance of qualifying for it again this year, make sure that you get all of your receipts together to give yourself the best shot of qualifying again next year.



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