Changes to the calculation of work-related car expense deductions

Commencing in the 2015-16 income year, only 2 methods will be available for calculating deductible work-related car expenses, the ‘cents per kilometre’ method and the logbook method. Both the ‘12% of original value’ method and ‘one-third of actual expenses incurred’ method will be removed.

Over 80% of claimants us the ‘cents per kilometre’ method. This method will be simplified and modernised. Currently, the rate of deduction differs according to the engine size of the relevantcar. This will be replaced with a single 66c per kilometre rate for all cars irrespective of engine size. This is expected to result in a slight increase in deductible expenses for those who drive smaller cars, whilst reducing the deductible amount for those driving medium/large cars. These changes will not impact leasing or salary sacrifice arrangements.

Exclusions to the Zone Tax Offset for ‘fly in and fly out’ workers

From 1 July 2015, the Government will exclude ‘fly-in fly-out’ and ‘drive-in drive-out’ workers from claiming the Zone Tax Offset if their normalresidence is not within a ‘zone’. Currently, the Zone Tax Offset operates to provide concessional tax treatment for individuals who reside or work in a specified remote area for more than 183 days in an income year.

The effect of this is that an individual who lives outside of the zone but has a ‘fly in and fly out’ job situated inside the zone will not be eligible for the Zone Tax Offset. This change will refocus the Zone Tax Offset on those who genuinely reside in a ‘zone’.

Changes to the taxation of working holiday makers

From 1 July 2016, individuals who are in Australia for a working holiday will be treated as non-residents for tax purposes. The result of this is that they will be taxed at 32.5% from their first dollar of income up to $80,000. In addition, these individuals will no longer being eligible for the tax-free threshold, low income tax offset of lower tax rate of 19% (for taxable income above the tax free threshold up to $37,000).

Increasing the Medicare levy low-income thresholds

Commencing in the 2014-15 income year, the Medicare levy low-income threshold will be increased for singles to $20,896 (up from $20,542 for 2013-14), and for couples with no children to $35,261 (up from $34,367 for 2013-14). The additional amount of threshold for each dependent child or student will be increased to $3,238 (up from $3,156).

For single seniors and pensioners, the threshold will be increased to $33,044 (up from $32,279) and applies to those entitled to the seniors and pensioners tax offset (SAPTO).