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Federal Budget 2013/14


Medical expenses tax offset abolished

The net medical expenses tax offset (NMETO) will be abolished although there will be a transitional period for those currently claiming the offset.  Currently, the NMETO provides a 20% offset against net medical expenses over $2,060 (2011/2012).  There is no upper limit.

From 1 July 2013, taxpayers who claimed the NMETO for the 2012/2013 income year will continue to be eligible for the 2013/2014 income year if they have eligible out of pocket medical expenses above the relevant thresholds. Similarly, those who claim the NMETO in 2013/2014 will continue to be eligible for the offset in 2014/2015.

The NMETO will continue to be available for taxpayers for out of pocket medical expenses relating to disability aids, attendant care or aged care expenses until 1 July 2019 when Disability Care Australia is fully operational and aged care reforms have been in place for several years.

Date of effect: From 1 July 2013


Previously announced changes for individuals

Medicare Levy increase
As previously announced on 1 May 2013, the Medicare Levy will increase from 1.5% to 2% to fund DisabilityCare Australia.  The hypothecated tax is estimated to generate tax revenue of $11.4 billion over the forward estimates period and $20.4 billion to 2018/2019.

The revenue raised by the increase in the Medicare levy is to be invested in a new fund - the DisabilityCare Australia Fund – to be drawn on for expenditure directly related to DisabilityCare Australia. It is estimated the Fund will generate $467.4 million in earnings over the forward estimates period.

Date of effect:  From 1 July 2014

Work related self education expenses capped
As previously announced, the Government will cap deductions for self education expenses at $2,000 from 1 July 2014.    This is a significant change from the current position as there is currently no cap on claiming self education expenses. The new $2,000 annual cap will also apply to self education expenses paid by employers under a salary sacrifice arrangement.   

Income tax cuts 'deferred'
The income tax cuts due to commence from 1 July 2015 have been deferred.  In the 2012/2013 Budget, the Government announced that from 1 July 2015, the tax-free threshold would increase to $19,400, with a reduction in the LITO to $300.

The tax cuts were part of the Clean Energy initiative to compensate for increases in the carbon price passed through to consumers.   At the time, the carbon price was expected to be $25.40 in 2015/2016.  The carbon price has slumped and is now expected to be $12.10 in 2015/2016.

No discount for paying HELP up front

As previously announced, the Government will remove the following discounts applying to up-front and voluntary payments made under the Higher Education Loan Program (HELP):
  • the 10% discount available to students electing to pay their student contribution up-front; and
  • the 5% bonus on voluntary payments to the Australian Taxation Office of $500 or more.
Date of effect: From 1 January 2014


More from the Federal Budget 2013
Click through to the pages below for details about how the Budget affects you.

Federal Budget 2013 - A Swan song?
Business
Tax Measures
Superannuation
Families & Community
Key economic highlights

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Last updated May 2013. This article is provided for information purposes only and should not be used in place of advice from your accountant. Please contact us on 02 9957 4033 to discuss your specific circumstances.

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Disclaimer

This article is provided for information purposes only and correct at the time of publication. It should not be used in place of advice from your accountant. Please contact us on 02 9957 4033 to discuss your specific circumstances.

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