Tax Rates 2019

What is included in assessable income?

Your assessable income must be declared on your tax return each year. It includes any of the following:

1. Employment income

This includes any income you receive for full-time, part-time or casual work. Examples of employment income are:

• Salary, wages, commissions, bonuses, parental leave pay and payments from a work-related insurance scheme (such as income protection, sickness/ accident payments or worker’s compensation).
• Any allowances that you may receive from your employer, such as car, travel, clothing, laundry, meal, working conditions or special duties/qualifications allowances.
• Any other income you might receive (like tips, awards or discounted employee shares).
• Any lump sum payments you might receive, such as when you leave a job and are paid out for any unused leave.
• Any reportable fringe benefits that you might have received in excess of $2,000 over a 12-month period, such as using a company car for private purposes or having your employer cover some of your private expenses as part of a salary packaging arrangement. It’s important to understand though that you although you need to declare fringe benefits, you don’t actually pay tax on it. It’s used to work out your eligibility for any government benefits.

2. Super pensions and annuities

If you’re receiving a super pension, it may have three different components:

• A taxed element (where your fund has already paid tax),
• An untaxed element (where tax still needs to be paid), and
• A tax-free element (where no tax is payable).

Depending on your age, you may need to declare both the taxed and untaxed elements as income in the financial year you receive the payments, so that your overall tax obligation (or refund) can be determined by the ATO.

If you’re receiving an annuity (i.e. a series of regular payments from a life insurance company), it will also usually have taxable and tax-free components. You’ll need to declare the taxable components.

3. Government payments

If you’re receiving government payments like the aged pension or carer payments, they must be declared on your tax return. But it’s important to understand that some government payments are tax-exempt. You must still declare them though because they can affect your eligibility for other government benefits and tax offsets.

4. Investment income

This can include:

• Any interest you receive from accounts you have with banks or other financial institutions
• Any share dividends or returns from managed funds that you may receive
• Any rent that you receive on an investment property
• Any capital gains you make on the sale of an asset

5. Business, partnership and trust income

Any income you receive from running a business must be declared. If you’re a sole trader, you don’t need to lodge a separate business tax return.

If you’re in business in partnership with others, you must declare your share of the partnership’s income or loss as assessable income on your tax return.

If you’re a trustee in a trust, you must declare your share of the trust’s income in your tax return, even if it remained in the trust and you didn’t actually receive it.

6. Foreign income

If you’re an Australian resident for tax purposes, you must declare any foreign income that you receive, even if it’s already been taxed overseas. The ATO uses a system of credits and exemptions to work out if Australian tax is still payable on any foreign income you’ve earned.

7. Crowdfunding income

If you’ve raised any income for a project or venture via crowdfunding, some of it may be taxable if you’re carrying on a business or other profit-making scheme

Some of the above forms of assessable income will be automatically provided to the ATO each year by your employer/s and financial institutions where you’ve invested funds.

There are also other payments you might receive that aren’t included in your assessable income. Common examples include:

• Lump sum payments that you receive from insurance policies (e.g. for total and permanent disablement)
• The tax-free component of any eligible termination payments you receive when you leave an employer
• Genuine redundancy payments (up to certain limits based on your length of service)
• Child support or maintenance payments

What deductions are you allowed?

Eligible deductions reduce your e income and therefore the amount of tax you’re required to pay. The most common deductions are:

1. Work-related expenses

These include:

• Vehicle and travel. You can claim vehicle and travel expenses if you personally incur them as part of doing your work duties and you aren’t reimbursed by your employer (for example, if you do deliveries using your own vehicle). You can also claim for any private costs of travelling between your employer’s different locations. But it’s important to understand that you can’t claim the cost of travelling to and from work to your home.
• Clothing, laundry and dry-cleaning. You can claim for your cost of buying and cleaning work clothing provided that the clothing falls into at least one of the following categories:
  • It’s occupation-specific
  • It’s protective
  • It’s a compulsory uniform
• Home office. If you regularly work from home, you can claim the cost for work-related home office expenses, including a portion of your home’s running expenses (like phone, electricity and internet costs) based on your dedicated work area, as well as any work-related equipment that you buy.
• Phone and internet. If you’re paying for your own phone and internet connections and you use them for work purposes, you can claim the percentage that relates to work use.
• Overtime meals. If you get an overtime meal allowance as part of your employment conditions (and which you must include in your assessable income), you can claim up to that amount as an expense if you’ve used it.
• Self-education. You can claim the cost of self-education expenses (e.g. any costs associated with a course that leads to a formal qualification) provided they relate directly to your current employment. But you can’t claim repayments for any government assistance you receive to take a course (e.g. the Higher Education Loan Program).
• Tools and equipment. If you need to buy tools and other equipment to earn an income, you can claim a deduction for all or some of the cost, depending on the percentage of work-related and personal use.
• Other work-related expenses. This includes items like income protection insurance, union fees, and any personal costs associated with attending work-related seminars or workshops.

2. The cost of managing your tax affairs

You can claim the cost of managing your tax affairs, including the cost of advice for preparing and lodging your tax return and business activity statements (BAS).

3. Gifts and donations

You can claim the cost of any gifts or donations that you make to “deductible gift recipients” (such as registered charities). You can’t claim a donation if you received a personal benefit in exchange for your gift or donation, even if it’s a ticket to win a prize.

4. Interest, dividend and other investment income deductions

Any expenses associated with earning assessable interest, dividend or other investment income (like bank fees, interest on money borrowed to buy shares that have provided you with dividends, or investment management fees).

5. Personal super contributions

If you make a personal contribution to your super fund, you can claim a tax deduction provided that you complete an ATO form and send it to your super fund. Your super fund will tax the concessional super rate of 15%.

When claiming any tax deduction, it’s important to keep records so that you can substantiate your claim if you’re ever audited by the ATO.

What is taxable income?

Your taxable income can be decreased by reducing your assessable income or increasing your deductions. For example, a negative gearing investment strategy relies on offsetting a loss from a negatively geared investment against other income thereby reducing taxable income and therefore tax payable. In other words the investor is increasing their deductions to reduce their taxable income.

Similarly, salary sacrificing an amount into superannuation reduces an individual’s assessable income. This is because the individual is making a pre-tax contribution from their income to their super account. The contribution is deducted at the time the individual is paid and therefore reduces the gross (assessable) income of the individual. This in turn indirectly reduces the taxable income of the individual. Moreover, the super contribution is generally taxed at a concessional rate of 15% in the super fund (subject to the $25,000 contributions cap being complied with).

Income tax offsets, levies and surcharges

Low Income Tax Offset (LITO)

The Low Income Tax Offset (LITO) was originally introduced by the Government in 1993, providing low income earners who are Australian residents with a tax offset. LITO effectively means that you can earn up to $20,542 before any income tax is payable.

The table below outlines the method for calculating LITO:

Income	LITO amount
$37,000 or less	$445
$37,001 – $66,667	$445 less ((Taxable Income minus $37,000) x 1.5%))
More than $66,667	Nil

Source: ATO

Learn more about how the Low Income Tax Offset (LITO) works.

Low and Middle Income Tax Offset (LAMITO or LMITO)

The Low and Middle Income Tax Offset is available to Australian resident individuals that have taxable income not exceeding $125,333 for an income year during the 2018/2019 to 2021/2022 income years.The Low and Middle Income Tax Offset will operate in addition to the LITO and taxpayers may be entitled to receive both offsets during the 2018/2019 to 2021/2022 income years.

The amount of the offset will depend on the taxpayer’s relevant income level, as set out in the following table:

Relevant income for the 2018/2019 to 2021/2022 income years	Low and Middle Income Tax Offset amount
$37,000 or less	$255
$37,001 – $48,000	$255, plus 7.5% of the amount of relevant income exceeding $37,000 (to a maximum benefit of $1,080)
$48,001 – $90,000	$1,080 (maximum)
$90,001 – $126,000	$1,080, less 3% of the amount of relevant income exceeding $90,000

Source: ATO

Note that the new Low Income Tax Offset will replace both the Low and Middle Income Tax Offset and the LITO in the 2022/2023 and later income years. The new offset will be available to Australian resident individuals if their taxable income for the relevant income year does not exceed $66,667.

Learn more about how the Low and Middle Income Tax Offset (LAMITO) works.

Seniors and Pensioners Tax Offset (SAPTO)

SAPTO is a tax offset that’s available to eligible seniors and pensioners in Australia. In some cases, it can totally eliminate a recipient’s tax liability and their need to lodge a tax return. There are two eligibility requirements for the SAPTO:

1. You must have reached the pension age and be eligible to receive it.

The Age Pension age in Australia currently depends on your date of birth. The minimum age is currently 66 years, and this will progressively rise to 67 for all Australians from 1 July 2023.

2. You must pass a rebate income threshold test to determine whether you’re entitled to a full or partial offset.

Your rebate income is the total of following items:

• your taxable income (if any)
• your reportable employer super contributions (if any)
• your deductible personal super contributions (if any)
• your net financial investment loss (if any)
• your net rental property loss (if any)
• your fringe benefits (if any)

If you’re single, your total rebate income must be less than $32,279 to be eligible for the maximum SAPTO of $2,230. The SAPTO progressively reduces by 12.5 cents for every dollar over this amount, up to an income level of $50,119, where the offset cuts off completely. If you have a spouse, your combined rebate income must be less than $57,948 for you to both receive the combined spousal SAPTO of $3,204. The spousal SAPTO progressively reduces for individual income levels higher than this amount, up to $83,580, where the offset cuts off completely.

Learn more about how the Seniors and Pensioners Tax Offset (SAPTO) works.

Medicare levy

Medicare gives Australian residents access to universal health care. It is partly funded by the Medicare levy, which is 2% of an individual’s taxable income. Individuals pay Medicare levy in addition to the tax they pay on their taxable income.The Medicare levy applies only to residents. The Medicare levy low-income thresholds (at or below which no Medicare levy is payable) and Medicare levy phase-in limits are shown in the table below. If the individual’s income is above the Medicare levy phase-in limits, the full Medicare levy rate is imposed as follows:

• Prior to the 2014/2015 income year — 1.5%
• 2014/2015 and later income years — 2%.

Where the income is above the low-income threshold but no more than the phase-in limit, the levy payable is shaded in such that the levy is 10% of the excess of taxable income over the low-income threshold. This is shown below in:

• Columns A to D as: (Low-income threshold | Phase-in limit)
• Column E as: (Increase in lower income limit | Increase in upper income limit).

	A	B	C	D	E
Income year	Individuals	Families	Pensioners below age pension age	Seniors	+ amount for each dependent child/student
2017/2018	$21,980 | $27,475	$37,089 | $46,361	$34,758 | $43,447		$3,406 | $4,257
2016/2017	$21,655 | $27,068	$36,541 | $45,667	$34,244 | $42,805		$3,356 | $4,195
2015/2016	$21,335 | $26,668	$36,001 | $45,001	$33,738 | $42,172		$3,306| $4,132,
2014/2015	$20,896 | $26,120	$35,261 | $44,076	$33,044 | $41,305		$3,238| $4,047,
2013/2014	$20,542 | $24,167	$34,367 | $40,432	$32,279 | $37,975		$3,156| $3,713
2012/2013	$20,542 | $24,167	$33,693 | $39,639	$32,279 | $37,975		$3,094 | $3,640
2011/2012	$19,404 | $22,829	$32,743 | $38,522	$30,451 | $35,825	$30,685 | 36,100	$3,007 | $3,538

Source: ATO. Note 2018/2019 figures are not yet available.

Medicare levy surcharge

An additional Medicare levy surcharge (MLS) is payable by taxpayers without adequate private health insurance. The MLS is calculated, depending on the individual’s surcharge income, at 1%, 1.25% or 1.5% of:

• Taxable income,
• Total reportable fringe benefits, and
• Any amount on which family trust distribution tax has been paid.

Surcharge income includes:

• Taxable income,
• Reportable fringe benefits,
• Total net investment losses (e.g. negative gearing deductions), and
• Reportable super contributions.

Medicare levy surcharge income thresholds

The Medicare levy surcharge (MLS) thresholds are as follows:

Income year	Income threshold for individuals	Income threshold for families	Rate of surcharge
From 2014/2015 onwards	$90,000	$180,000	See table below
2013/2014	$88,000	$176,000	See table below
2012/2013	$84,000	$168,000	See table below
2011/2012	$80,000	$160,000	1%

The MLS thresholds for the 2014/2015 to the 2020/2021 income years are as follows:

Tiers for 2014/2015 to 2020/2021	Income threshold for individuals	Income threshold for families	Rate of surcharge
Tier ‘0’	Up to $90,000	Up to $180,000	0%
Tier 1	$90,001 – $105,000	$180,001 – $210,000	1%
Tier 2	$105,001 – $140,000	$210,001 – $280,000	1.25%
Tier 3	$140,001 and above	$280,001 and above	1.50%

Lifetime Health Cover loading

A person who does not have private health (hospital cover) insurance on their Lifetime Health Cover base day (usually 1 July following the 31^st birthday) but who later in life decides to take out private hospital cover will pay a 2% Lifetime Health Cover (LHC) loading on top of their premium for every year they are aged over 30.

The LHC loading also applies if a person ceases to have private health insurance and then later decides to take out private health insurance again. There is an exception, known as ‘Days of Absence’ which permits someone to be without hospital cover for periods totalling 1,094 days (i.e. three years less one day) during their lifetime, without affecting their loading. This covers small gaps, such as switching from one fund to another.

However, if the total gap period exceeds 1,094 days, the person will pay a 2% loading on re-joining private hospital cover. The loading increases by 2% for every year without cover after that. The LHC is removed after 10 continuous years of private health insurance cover. The private health insurance offset has not applied to the Lifetime Health Cover loading since 1 July 2013.

Private Health Insurance Offset

The private health insurance offset is an amount the government contributes towards the cost of an individual’s private health insurance premiums. The offset can be claimed for premiums paid for a private health insurance policy that provides private patient hospital cover or combined hospital and general cover. The offset is income tested, which means eligibility to receive it depends on an individual’s income. Persons with a higher income may have their offset entitlement reduced or may not be entitled to any offset at all.

The rates and thresholds for the private health insurance offset which apply for the 2016/2017 to 2018/2019 income years are as follows:

	Offset entitlement by income threshold
	Tier ‘0’	Tier 1	Tier 2	Tier 3
Singles	Up to $90,000	$90,001–$105,000	$105,001–$140,000	$140,001 or more
Couples/families	Up to $180,000	$180,001–$210,000	$210,001–$280,000	$280,001 or more
Rate of Medicare levy surcharge
All ages	0%	1.0%	1.25%	1.5%
Rate of Private Health Insurance Offset: 1 April 2018  – 31 March 2019
Under 65 years	25.415%	16.943%	8.471%	0%
65–69 years	29.651%	21.180%	12.707%	0%
70 years and over	33.887%	25.415%	16.943%	0%
Rate of Private Health Insurance Offset: 1 April 2017 – 31 March 2018
Under 65 years	25.934%	17.289%	8.644%	0%
65–69 years	30.256%	21.612%	12.966%	0%
70 years and over	34.579%	25.934%	17.289%	0%
Rate of Private Health Insurance Offset: 1 July 2016 – 31 March 2017
Under 65 years	26.791%	17.861%	8.930%	0%
65–69 years	31.256%	22.326%	13.395%	0%
70 years and over	35.722%	26.791%	17.861%	0%

The Medicare levy surcharge and private health insurance offset income thresholds were paused at the 2014/2015 amounts from 1 July 2015 and will remain unchanged for six years from 2014/2015 to 2020/2021. The private health insurance income thresholds for offset purposes are normally adjusted annually on 1 April. The annual adjustment has been paused for three years from 2015/2016.

Disclaimer: The contents of this article are for the purposes of providing general information only. Persons should seek appropriate advice from a tax adviser, accountant or financial adviser before undertaking any investments or strategies with respect to their tax or superannuation interests.