Net Medical Expenses tax offset

The high income earners are facing the increased premium to the private health insurance now they will face a lower tax offset available to them under the net medical expenses.

For the 2011 year, the tax offset is 20% of the net medical expenses in excess of $2000

For the 2012 year, the tax offset is 20% of the net medical expenses in excess of $2060

Effective from 1 July 2012, the tax offset will be different for those whose adjusted income is above the Medicare Levy Surcharge threshold ($84,000 for singles and $168,000 for families for 2012-2013 year) and below.

For those above the threshold, the tax offset will be 10% of the $5000. People below the threshold will be unaffected.

Federal Budget 2012-2013, Superannuation

As previously mentioned on the post regarding Federal Budget 2012-2013, the changes to the superannuation which may be relevant to those who are contributing are:-

• Concessional superannuation contribution is capped at $25,000 per annum, regardless of the age.

The government previously proposed that the concessional contribution cap for individuals aged 50 and over is $50,000, if their superannuation balance is below $500,000. This will not go forward for the year ending 30 June 2013 and 30 June 2014. Rather this application of this proposal is proposed to commence from 1 July 2014.

So, it may be best to contribute to your superannuation up to the cap and claim tax deduction this year, provided:-

• you are eligible to claim deduction (satisfy the 10% income test)
• you have spare cash
• you will benefit from the tax deduction

It may be best to discuss with your accountants or SMSF administrators if contributing up to the cap may be the best strategy for you.

• Tax concession for those earning ‘income’ above $300,000 will be reduced from 30% to 15% excluding Medicare Levy

Effective from 1 July 2012, those with ‘income’ above $300,000 will pay more tax on the concessional superannuation contribution received. Note that the tax is pay by your superannuation fund.

For this purpose, the ‘income’ is calculated as follows:-

Taxable Income + Concessional contribution (e.g. Super Guarantee, salary sacrificed contribution) + Adjusted Fringe Benefit + Net Investment Loss + Target foreign income & tax-free government pension & benefit – child support

For individuals whose ‘income’ excluding the concessional contribution is less than $300,000, but after adding the concessional contribution will get them above the $300,000 threshold, the reduced tax concession will only apply to part of the contributions above the threshold.

E.g. if your ‘income’ excluding the concessional contribution is $280,000 with concessional contribution of $25,000, then your concessional superannuation of $20,000 will be taxed at 15%, while the excess of $5,000 will be taxed at 30%.

‘Income’ pre concessional contribution	$280,000
Concessional Superannuation	$25,000
Total ‘income’	$305,000
Threshold	$300,000
Excess	$5,000

For SMSF auditors, note that the government proposed that additional funding to ASIC and ATO for developing exams for SMSF auditors, deregistering non-complaint auditors, and compliance and competence checks.

Federal Budget 2012-2013

The Australian Government has recently held the federal budget 2012-2013 on 8 May 2012. As promised, the Government is on its track to budget surplus. However, the people are still questioning if budget surplus is realistic.

Rather than touching on whether the budget surplus is attainable, rather we will have a look at the outcome of the Federal Budget 2012-2013 and how it may affect people.

The following is a list of several topics which were covered in the Federal Budget 2012-2013. For a complete details, you may visit budget.gov.au/2012-13/