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- Herausgeber: John Wiley & Sons
- Kategorie: Ratgeber
- Sprache: Englisch
An essential guide that will help you minimise your tax bill and maximise your after-tax earnings
In 101 Ways to Save Money On Your Tax – Legally! 2024–2025, bestselling author Adrian Raftery — aka Mr. Taxman — shows you how to lower your tax bill and keep more of your hard-earned money. You’ll learn what’s different this year in the tax codes and how the May 2024 budget and Stage 3 tax cuts affect your bottom line. Get the most out of your taxable assets and (legally!) reduce your taxes.
101 Ways to Save Money On Your Tax – Legally! makes it easy to find and implement every deduction that applies to you. This handy guide, trusted by tens of thousands of Australians, takes the stress and confusion out of the tax season. Find out what you actually owe and lodge on time, with no mistakes.
Whether you're an individual, married couple, investor, business owner or pensioner, this guide will help you:
- Understand how your taxes have changed for this year
- Reduce your tax bill, potentially by $100s or $1000s
- Easily navigate work-related expenses, levies, shares, property, education, business expenses, family expenses, superannuation, and more
- Protect yourself against errors, audits, overpayments, and common tax traps
- Get the answers to frequently asked questions
Updated with all the latest tax legislation and thresholds, this 14th edition of 101 Ways to Save Money On Your Tax – Legally! is the comprehensive, authoritative and easy-to-follow guide that every Australian needs. Don’t pay more than you have to. Mr. Taxman is here to help.
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Seitenzahl: 439
Veröffentlichungsjahr: 2024
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Table of Contents
COVER
TABLE OF CONTENTS
TITLE PAGE
COPYRIGHT
DEDICATION
ABOUT THE AUTHOR
HOW TO USE THIS BOOK
INTRODUCTION
PART I: YOU AND YOUR FAMILY
1 MARRIAGE
2 INCOME SPLITTING
3 DEPENDANT (INVALID AND CARER) TAX OFFSET
4 CHILDREN
5 PAYMENTS FOR NEW PARENTS
6 CHILD CARE
7 LOW-INCOME EARNERS
8 SENIOR AND PENSIONER TAX OFFSET
9 OTHER GOVERNMENT BENEFITS
10 FAMILY BREAKDOWN
11 DEATH
12 FAMILY TRUSTS
PART II: YOUR EMPLOYMENT
13 CAR USAGE
14 METHODS TO CLAIM CAR TRAVEL
15 TRAVEL
16 UNIFORM
17 HOME OFFICE
18 OTHER WORK-RELATED DEDUCTIONS
19 KEEPING THOSE RECEIPTS
20 ATO HIT LISTS
21 REDUNDANCY
22 WORKING A SECOND JOB
23 SALARY SACRIFICE
24 FRINGE BENEFITS
25 LIVING-AWAY-FROM-HOME ALLOWANCE
PART III: YOUR EDUCATION
26 CLAIMING SELF-EDUCATION EXPENSES
27 STUDENT LOANS
28 AUSTUDY AND ABSTUDY
29 SCHOLARSHIPS
30 SCHOOL BUILDING FUNDS
31 EDUCATION SAVINGS PLANS
PART IV: YOUR INVESTMENT PROPERTY
32 NEGATIVE GEARING
33 INTEREST
34 DEPRECIATION AND LOW-VALUE POOLING
35 REPAIRS AND MAINTENANCE
36 BORROWING AND LEGAL EXPENSES
37 OTHER RENTAL PROPERTY DEDUCTIONS
38 FOREIGN INVESTMENT PROPERTIES
39 CAPITAL GAINS TAX
40 PAYG WITHHOLDING VARIATION
41 CO-OWNERSHIP OF YOUR INVESTMENT PROPERTY
42 BUILD-TO-RENT PROPERTIES
PART V: YOUR SHARES
43 DIVIDENDS
44 SHARES OWNED BY LOW INCOME EARNERS
45 BORROWING TO BUY SHARES
46 OTHER SHARE DEDUCTIONS
47 CAPITAL GAINS TAX ON SHARES
48 REALISING CAPITAL LOSSES
49 INHERITING SHARE PORTFOLIOS
50 SHARE TRADERS VERSUS SHARE INVESTORS
51 RIGHTS AND OPTIONS
52 EMPLOYEE SHARE SCHEMES
53 SHARE PORTFOLIOS WITHIN SELF MANAGED SUPERANNUATION FUNDS
54 CRYPTOCURRENCY
55 NON-FUNGIBLE TOKENS
PART VI: YOUR SUPERANNUATION
56 CONTRIBUTION LIMITS
57 TRANSFER BALANCE CAP
58 DOWNSIZER CONTRIBUTION
59 COMPULSORY EMPLOYER CONTRIBUTIONS
60 SALARY SACRIFICE
61 DIVISION 293 TAX
62 SUPER CO-CONTRIBUTION
63 TRANSFERRING FOREIGN SUPER
64 SELF MANAGED SUPERANNUATION FUNDS
65 BUYING PROPERTY WITHIN SMSFS
66 GEARING THROUGH A SUPER FUND
67 ACCESSING YOUR SUPER
68 TRANSITION TO RETIREMENT
69 ACCOUNT-BASED PENSIONS
70 DEATH BENEFITS
71 LOST OR UNCLAIMED SUPER
PART VII: YOUR BUSINESS
72 CHOOSING THE RIGHT BUSINESS STRUCTURE
73 TAX OBLIGATIONS
74 RECORD KEEPING
75 DEFERRING TAX
76 TRADING STOCK
77 BAD DEBTS
78 HOME-BASED BUSINESSES
79 SHARING ECONOMY
80 EMPLOYING PEOPLE
81 SINGLE TOUCH PAYROLL
82 TAX CONCESSIONS AND OFFSETS
83 SELLING OR CLOSING DOWN
84 PERSONAL SERVICES INCOME
85 NON-COMMERCIAL LOSSES
86 DIVISION 7A LOANS BY PRIVATE COMPANIES
87 FRANCHISING
88 CROWDFUNDING
PART VIII: MISCELLANEOUS
89 OVERSEAS INCOME
90 GETTING A GREAT TAX ACCOUNTANT
91 LODGING YOUR TAX RETURN
92 AMENDING RETURNS AND OBJECTING TO ASSESSMENTS
93 ATO DATA MATCHING
94 PROBLEMS PAYING YOUR TAX
95 ESTATE PLANNING
96 PRIVATE ANCILLARY FUNDS
97 LEVIES
98 ZONE AND OVERSEAS FORCES TAX OFFSETS
99 TAX-EFFECTIVE INVESTMENTS
100 TAX PLANNING AS A 365-DAY PROCESS
101 JUST DO IT!
GLOSSARY
BIBLIOGRAPHY
INDEX
END USER LICENSE AGREEMENT
List of Tables
Chapter 1
TABLE 1.1: tax rates for individuals excluding levies (2024–25)
TABLE 1.2: tax on eligible income for minors (2024–25)
TABLE 1.3: paid parental leave
TABLE 1.4: child care subsidy rates (2022–23)
TABLE 1.5: child care hourly rate caps (2023–24)
TABLE 1.6: thresholds for senior and pensioner tax offset (SAPTO) (2023–24)...
TABLE 1.7: deceased estate tax rates (2024–25)
Chapter 2
TABLE 2.1: example—tax withheld
TABLE 2.2: car fringe benefits statutory formula rates (2024–25)
TABLE 2.3: example — salary sacrifice
TABLE 2.4: tax rates for working holiday makers excluding levies (2024–25)...
TABLE 2.5: reasonable food and drinks amounts for a LAFHA paid per week to o...
Chapter 3
TABLE 3.1: HELP repayment thresholds and rates (2024–25)
Chapter 4
TABLE 4.1: net rental income or loss
TABLE 4.2: example of decline-in-value deduction calculations
TABLE 4.3: state land tax thresholds
Chapter 5
TABLE 5.1: tax rates for individuals excluding levies (2024–25)
Chapter 6
TABLE 6.1: non-concessional contribution limits under bring forward period r...
TABLE 6.2: example of salary-sacrifice benefits
TABLE 6.3: example of carry forward concessional contributions
TABLE 6.4: minimum percentage age factors (2024–25)
Chapter 7
TABLE 7.1: tax rates for companies (2024–25)
Chapter 8
TABLE 8.1: example of the reduced minimum annual distribution rate for PAFs...
TABLE 8.2: medicare levy surcharge and private health insurance rebate (sing...
TABLE 8.3: medicare levy surcharge and private health insurance rebate (coup...
TABLE 8.4: zone and overseas forces tax offsets (2023–24)
List of Illustrations
Chapter 6
FIGURE 6.1: superannuation industry in Australia 1996–2020 by total assets (...
Guide
Cover
Title Page
Copyright
Dedication
About the Author
How to Use This Book
Introduction
Table of Contents
Begin Reading
Glossary
Bibliography
Index
End User License Agreement
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First published in 2024 by John Wiley & Sons Australia, Ltd
Level 4, 600 Bourke Street, Melbourne, VIC 3000
First edition published by Wrightbooks (an imprint of John Wiley & Sons Australia, Ltd) in 2011. New edition published annually.
© Adrian Raftery 2024
The moral rights of the author have been asserted
ISBN: 978-1-394-26190-1
All rights reserved. Except as permitted under the Australian Copyright Act 1968 (for example, a fair dealing for the purposes of study, research, criticism or review), no part of this book may be reproduced, stored in a retrieval system, communicated or transmitted in any form or by any means without prior written permission. All inquiries should be made to the publisher at the address above.
Cover design by Wiley
Tables 1.1, 1.2, 1.6, 1.7, 2.1, 2.2, 2.3, 2.4, 2.5, 3.1, 4.2, 5.1, 6.1, 6.2, 6.4, 7.1, 8.2, 8.3, 8.4 © Australia Taxation Office for the Commonwealth of Australia
Tables 1.3, 1.4, 1.5 © Services Australia for the Commonwealth of Australia
DisclaimerThe material in this publication is of the nature of general comment only, and does not represent professional advice. It is not intended to provide specific guidance for particular circumstances and it should not be relied on as the basis for any decision to take action or not take action on any matter which it covers. Readers should obtain professional advice where appropriate, before making any such decision. To the maximum extent permitted by law, the author and publisher disclaim all responsibility and liability to any person, arising directly or indirectly from any person taking or not taking action based on the information in this publication.
Dedicated to Bob and Sharon Murphy — two wonderful people who sadly passed away whilst I updated this year's edition.
ABOUT THE AUTHOR
Dr Adrian Raftery (PhD, MBA, B Bus, CTA, FCA, FIPA FFA, GAICD), aka Mr Taxman, is one of Australia's leading commentators on all matters relating to tax and finance. With regular appearances on TV and in the media, Adrian is one of Australia's leading tax and financial experts.
Part of Adrian's ‘tax’ appeal as a financial media commentator is due to his personable and approachable style. Just as importantly, Adrian's 34 years’ experience as an award-winning accountant working with small and medium businesses, and as a personal tax expert, means he has the relevant knowledge and experience to give qualified advice.
Adrian is considered so good at what he does that he was one of the youngest Australian accountants to have advanced to Fellowship with the Institute of Chartered Accountants at the age of 33 and had an award-winning Sydney accountancy firm at just 25! Adrian is also one of the country's leading experts on the rapidly growing Australian superannuation industry with work from his PhD on self-managed superannuation funds published in top-ranked international academic journals. These factors and Adrian's ability to translate complicated tax, superannuation and finance jargon into understandable and workable solutions are probably why ‘Mr Taxman’ is frequently called upon for his viewpoints by the Australian media.
HOW TO USE THIS BOOK
This book is designed to be of benefit to 99.9 per cent of taxpayers. If you have an investment property, own a share portfolio, have money in superannuation, have a family, work as an employee or run your own business, there will be something in here for you.
While it is extremely unlikely that all 101 tips will be applicable to you, your family or your business, just feel comfortable knowing that one tip alone will be more than enough to pay for the investment you make in buying this book. This book has been written to take into account all phases of life, so if you find that only a few tips apply to you right now, don't worry because more tips will become relevant as you grow older. Make sure that you consult your own adviser to assess your own particular needs before implementing any of these tips.
If there is one constant with tax, it is change. That is why I update this book every year to take into account the latest federal budget changes and other Government measures each year. If you intend to use this book as a reference guide over a number of years, you should always check the latest tax legislation for the current figures and thresholds.
Remember that tax planning should be a year-round exercise, not merely one that's done in the last few weeks before 30 June. A lot of these strategies are just as useful on 1 July as they are on 30 June.
TIP
When you see this box throughout the book, it will provide you with a handy suggestion in relation to the particular money-saving strategy.
TAX FACT
When you see this box throughout the book, it will provide you with an interesting fact.
PITFALL
When you see this box throughout the book, it will outline a potential pitfall in relation to this money-saving strategy that you need to look out for.
BONUS RESOURCES
When you see this box throughout the book, it will provide you with a tool or a calculator available on my website www.mrtaxman.com.au to help explain or work out a strategy.
? FAQ
When you see this box throughout the book, it will provide you with an answer to a frequently asked question that I have received from readers of previous editions of this book.
PROPOSED CHANGE
When you see this box throughout the book, it will outline a tax change which has been proposed by the government but has not been put through as legislation as at date of publication. Before making any decisions, ensure that you check the status of these proposed changes as there may be variations to the original proposal as it passes through both houses of parliament.
COVID-19 RELIEF
When you see this box throughout the book, it will outline a relief measure that the government introduced to combat the economic fallout from the coronavirus pandemic which has swept the globe since 2020. Most of these relief measures have expired as at date of publication, so only a few remain within this edition. However before you make any decisions in relation to them, ensure that you check the dates and current status as they were only designed as temporary measures and may have lapsed by the time you take action.
INTRODUCTION
Like for many people, writing a book — just one — was on my bucket list for years. So come 2010 I was really fortunate to get the opportunity to write the first ever edition of 101 Ways to Save Money on Your Tax – Legally!
Back then I had three main objectives for the book. None of them were to make money (although my mates think that was the only reason!). First, I wanted to help maximise everyone's refunds by making you more aware of the different ways that are available to help you save money. I wanted to reduce the confusion around all the different types of government benefits and tax concessions that were available to you so that you started claiming more of what you were legally entitled to.
Second, through the setting of boundaries, I wanted to reduce the amount of fraudulent claims made so that we all pay a fairer share of tax. I am not sure what small part I played with achieving this objective but looking back at table 1.1 from the first edition it's hard to believe that the tax-free threshold was only $6000 whilst family companies paid an extra 5 per cent tax than what they will in 2024-25! Third, although this was never published, I didn't want my mates hassling me for tax tips at 2.45am when we were out having a few beers. Needless to say as time rolls on, with age and families, this objective has also been achieved!
Whilst these objectives haven't changed over the past decade — and the structure of the book is still pretty much the same — I never thought in my wildest dreams I would be writing tax tips about cryptocurrency, non-fungible tokens, decentralised finance, the sharing economy, downsizer contributions and a crazy coronavirus that would cause a pandemic around the globe. Likewise, I never thought that tax incentives such as the education tax refund and medical expense rebates would be scrapped along with travel to visit your investment property. I guess tax changes is one of the few constants in life, along with death and taxes!
This book is split into various parts in line with some key areas surrounding your finances:
you and your family
your employment
your education
your investment property
your shares
your superannuation
your business.
In each part I will share with you a number of tips and strategies that you can implement to save money on your taxes — legally!
You should leave no stone unturned in your quest to legally minimise your tax. While everyone should pay their fair share of tax, the late Kerry Packer summed it up best when he famously said ‘don't tip them!’
Now I don't expect that every single tip will be applicable to every single person out there but I am confident that there will be at least one tip that will save you more than the cost of this book. Some tips will maximise your refund, others will minimise your tax, while others will simply save you money. Some may save you millions over a lifetime, others just a few dollars. But times are tough and every dollar counts.
Over the years I have dedicated this book to many amazing people who have had a huge impact on my life. My mum and dad (who have both passed away); my three kids (Hamish and Zoe on earth and Sophie in heaven); my wife Kylie; my university colleagues; the Irish cricket team; my neighbours; the Allies on Kokoda; community sport umpires and officials; the Bayside Bhoys; the frontline emergency services and healthcare workers and even the Commissioner of Taxation!
But I also dedicated two editions to two amazing families who helped us have Hamish and Zoe via surrogacy (the Donavans and the Merediths). Before we started the surrogacy process, I remember one of our tummy mummies telling us that she had a gift to bear children, but ‘a gift is not a gift unless it is given’.
I feel the same way about this book. Ever since I started working as an accountant at the age of 18, I have had a gift (some would say a curse) for understanding tax. But as a gift should be given, I have decided to share some great tax tips with you for a small tax deductible fee (that is, the price of this very cheap book!).
Whatever you get out of this book, I hope it is positive and not too taxing! And this is my gift to you.
PART IYOU AND YOUR FAMILY
From marriage and children right through to divorce, retirement and ultimately death, all families encounter many life-changing events. And in nearly all of these events, there are tax consequences along the way.
The Australian tax system offers a range of tax benefits including credits, refunds, offsets and bonuses to support families. Some people feel ambivalent about putting their hand out for government entitlements. But don't be shy in claiming your fair share. After all, the government doesn't get shy when it comes to taxing you!
TAX FACT
Tax evasion and tax avoidance are illegal ways of reducing your tax payable. Tax planning and tax minimisation are legal ways of reducing your tax payable.
Part I looks at the tax concessions available to families, the special considerations you need to look out for, as well as some simple strategies to save tax within your family.
TIP
You need a tax file number (TFN) to be eligible for any of these tax concessions, as do your spouse and your children if they have income, superannuation or investments.
1 MARRIAGE
Accountants are frequently asked two questions by couples who are just about to get married: ‘Are there any tax implications once we tie the knot?’ and ‘Do we need to start doing joint tax returns?’
Your wedding day is a special day. So I'm perplexed as to why on earth the bride and groom are thinking about the ATO during such an exciting time in their lives!
You don't need to worry about tax in the lead-up to your nuptials. Unless you are involved in a business together, you don't have to lodge a combined tax return. Any share of joint investments, such as interest, dividends and rental properties, is still recorded separately in your respective tax returns.
TIP
You don't have to lodge a combined tax return if you're married. Any joint income is recorded separately in your respective tax returns.
You do need to show on your return that you now have a spouse, and disclose his or her taxable income each year.
PITFALL
The combined income of married couples is taken into account if you don't have private health insurance (an extra 1 per cent Medicare levy is charged if you earn over $186 000 combined, increasing to 1.5 per cent for couples earning more than $286 000) as well as when calculating Family Assistance Office benefits such as child care rebates and family tax benefits.
If you elect to change your name, you can notify the tax office:
by phone on 13 28 61
by post after completing the
Change of details of individuals form
(NAT 2817)
or online via your myGov account at
www.my.gov.au
. Make sure it is linked to the ATO.
You will need either your Australian full birth certificate; your Australian marriage certificate; or your Australian change of name certificate.
According to the ATO, the definition of spouse has been extended so that both de facto relationships and registered relationships are now recognised. Your ‘spouse’ is another person (whether of the same sex or opposite sex) who:
is in a relationship with you and is registered under a prescribed state or territory law
although not legally married to you, lives with you on a genuine domestic basis in a relationship as a couple.
TAX FACT
Since 1 July 2009, people living in same-sex relationships have been treated in the same way as heterosexual couples for tax purposes. The ATO has outlined some of the tax concessions now open to same-sex couples, including:
Medicare levy reduction or exemption
Medicare levy surcharge
dependant (invalid and carer) tax offset
senior and pensioner tax offset
spouse super contributions tax offset
main residence exemption for capital gains tax.
It is not unusual to find a couple where each owns a main residence that was acquired before they met. However, spouses are only entitled to one main residence exemption for capital gains tax (CGT) purposes between them. If both members of a couple own a main residence they must do either of the following:
select one residence for the exemption
apportion the CGT exemption between the two residences.
Provided the homes meet the requirements for the main residence exemption, they will both be wholly exempt from CGT for the period prior to the couple being treated as spouses. However, from the time the couple became spouses, only one exemption is available, though this may be divided between the two dwellings.
EXAMPLE
Mary bought a house in 1992. She lived in it right up to the day she married Matthew in 2006 and moved into his house, which he had purchased in 2000. As they elected to treat Matthew's house as their main residence, Mary will be subject to CGT on her house from 2006. She will not be liable for CGT on any capital growth in the 14 years prior to becoming Matthew's spouse.
2 INCOME SPLITTING
Income splitting is a legitimate tax-planning tool and one of the easiest strategies to implement. There are a few simple strategies for you to follow and they all mainly revolve around the marginal tax rates for yourself and your spouse, both now and in the future. The tax rates for individuals, not including the Medicare and other levies, are shown in table 1.1.
The goal is to try to level the income of couples so that they are paying tax at the same marginal rate. While income from personal exertion (such as your salary) cannot be transferred to the other partner, there is scope to have passive income from investments transferred if the assets are held in the lower-earning spouse's name.
TABLE 1.1: tax rates for individuals excluding levies (2024–25)
Source: © Australian Taxation Office for the Commonwealth of Australia.
Taxable income
Tax on this income
0–$18 200
Nil
$18 201–$45 000
16c for each $1 over $18 200
$45 001–$135 000
$4288 plus 30c for each $1 over $45 000
$135 001–$190 000
$31 288 plus 37c for each $1 over $135 000
$190 001 and over
$51 638 plus 45c for each $1 over $190 000
It amazes me how many smart business people are really dumb when it comes to reducing tax. Too often I see rich business people paying the highest tax rate (47 per cent including medicare levy) on interest or dividend income while their spouses don't fully use their $18 200 tax-free threshold. With the $1.9 million transfer balance cap on superannuation, there is an opportunity to split superannuation contributions between spouses such that each spouse maximises their respective $1.9 million thresholds before they retire.
TIP
Ensure that all investments are in the name of the lower-earning spouse so that they can take advantage of the lower tax rates (particularly the first $18 200, which is tax-free) on any investment income derived. Likewise, have all passive deductions, such as charitable donations, in the higher-earning spouse's name as they may get a return of up to 47 per cent, depending on their income level.
The best tax outcome can be achieved with a low-income earner holding investment assets. They could earn up to $22 575 tax-free (see p. 15), receive a refund of all imputation credits and pay less tax on capital gains.
EXAMPLE
If an investor on the top marginal tax rate of 47 per cent had a $100 000 capital gain on an asset held more than 12 months he/she would pay $23 500 in tax and Medicare levy. If an investor with no other income had a $100 000 capital gain he/she would pay $6538 — a saving of $16 962.
PITFALL
Any tax benefit derived by transferring an income-producing asset from one spouse to another may be lost if there is CGT to pay on assets originally acquired after 19 September 1985.
If you transfer an income-producing asset to your spouse you may need to find out the market value of the asset from a professional valuer. This is regardless of what you actually receive because the transaction is not independent nor is it at arm's length. In this situation either party could exercise influence or control over the other in connection with the transaction.
TIP
If you do not have a spouse, or you are both in the highest tax brackets, consider creating an investment company that is taxed at a flat rate of 30 per cent (reducing to 25 per cent if your company derives at least 20 per cent of its income from non-passive sources and has an annual turnover below the small company threshold of $50 million) for all income.
3 DEPENDANT (INVALID AND CARER) TAX OFFSET
The dependant (invalid and carer) tax offset (DICTO) is only available to taxpayers who maintain a dependant who is genuinely unable to work due to carer obligation or disability.
TAX FACT
The DICTO has consolidated the following tax offsets:
invalid spouse
carer spouse
housekeeper
housekeeper (with child)
child housekeeper
child housekeeper (with child)
invalid relative
parent/parent-in-law.
The ATO may deem you eligible for the DICTO if the following applies:
you contribute to the maintenance of your spouse, your parent (or your parent's spouse), your child (aged 16 or over) or siblings (aged 16 or over)
your dependant was being paid either:
a disability support, a special needs disability support or an invalidity service pension
a carer allowance for a child or sibling aged 16 or over
your adjusted taxable income as the primary income earner was $104 432 or less
your dependant's adjusted taxable income was less than $12 054
you and your dependant were Australian residents (not just visiting).
If you satisfy the above and your dependant's adjusted taxable income was $285 or less and you maintained him or her for the whole year, you can claim the maximum dependant (invalid and carer) tax offset of $2943.
PITFALL
The DICTO is reduced by $1 for every $4 that your dependant's adjusted taxable income exceeds $282.
TIP
You may be able to receive more than one amount of DICTO if you contributed to the maintenance of more than one dependant during the year, including if you had different spouses during the year.
TAX FACT
The ATO defines your ‘adjusted taxable income’ as the sum of the following amounts, less any child support that you have paid:
taxable income
adjusted fringe benefits
tax-free pensions or benefits
income from overseas not reported in your tax return
reportable super contributions
total net investment loss for both financial investments and rental properties.
EXAMPLE
Marlene and Saxon are married. Marlene is genuinely unable to work and has no salary or wage income. They have rental properties and a share portfolio. Saxon has also entered into a salary-sacrificing arrangement to boost his super. His taxable income is $130 000 after claiming a total net investment loss of $18 000. He has reportable super contributions of $17 000.
Saxon's adjusted taxable income is $165 000 ($130 000 + $18 000 + $17 000). As Saxon's adjusted taxable income is over the income threshold for this offset ($104 432) he is not eligible to claim the dependant (invalid and carer) tax offset.
4 CHILDREN
Any income that has been earned by your child's efforts, such as wages from an after-school job, is considered ‘excepted income’ and is taxed at the general adult tax rates regardless of whether your child is under 18. However, you should be cautious when putting investments in your child's name because minors do not enjoy the same tax-free thresholds as adults on this type of income, known as ‘eligible income’. Table 1.2 sets out the tax rates that apply to minors’ eligible income.
TABLE 1.2: tax on eligible income for minors (2024–25)
Source: © Australian Taxation Office for the Commonwealth of Australia.
Taxable income
Tax on this income
$0–$416
Nil
$417–$1307
66c for each $1 over $416
$1307 and over
45% of total income
PITFALL
Minors under the age of 18 are taxed at the highest marginal tax rate for ‘eligible income’ (such as interest, dividends and trust distributions) over $416 per annum.
If some of your child's income is excepted income and the rest is eligible income, they will pay ordinary rates on the excepted income and pay at the higher rate on the eligible income.
EXAMPLE
Louie is 17 on 30 June. He earned $8780 from a part-time job. He also received $920 in interest from money he had saved over the years from gifts. Therefore, he has an excepted income of $8780 and is entitled to the tax-free threshold of $18 200 for this income. He also has eligible income of $920 interest, which is taxed at the special higher rates.
A child is eligible from birth for a TFN from the ATO. If your child is under 16 (at the start of the calendar year) and does not supply their TFN to the bank or share registry, then 45 per cent tax will be withheld on interest earnings over a threshold of $420 as well as on all unfranked dividends. If your child is aged 16 and over, then the threshold is reduced to $120.
Children do not need to lodge a tax return if their assessable income is less than $416. However, if tax has been withheld from them by an investment body or employer, then they must lodge a return in order to get that money returned to them.
TIP
If you have an adult child who has a job while going to university or TAFE then they may be able to claim a deduction for certain expenses if there is a sufficient connection between their course and their assessable income. Some expenses that they might be able to claim in this instance include:
depreciation of assets (such as computers, desks and bookshelves) used for studying purposes
journals and periodicals
photocopying and printing costs
stationery
textbooks
travel from work to place of study.
They wouldn't be entitled to a deduction for any tuition fees payable under HELP or any repayments of outstanding HELP debts.
Earnings from a child's investments must be declared by the person who rightfully owns and controls the investment, not the person whose name it is in, or whose name it is held in trust for. This is regardless of whether the money is spent on resources for the child.
EXAMPLE
Sarah opens an account for her three-year-old daughter, Samantha, by depositing $8000. Sarah is signatory to the account and she also makes regular deposits and withdrawals to pay for Samantha's preschool expenses. The ATO would deem that the money belongs to Sarah and any interest earned from this account must be declared for tax by her.
If the funds in the account are made up of money received as birthday or Christmas presents, pocket money or savings from part-time earnings such as newspaper rounds, and these funds are not used by any person other than the child, then the interest earned is the child's income.
PITFALL
Children are not eligible for the low-income tax offset against unearned income, such as interest. The rebate can only be offset against excepted income.
5 PAYMENTS FOR NEW PARENTS
There are a few government payments available when becoming a mum or a dad.
Paid parental leave
Eligible working parents of children born or adopted may be entitled to the paid parental leave scheme to help them care for a new baby, dependent on when your child was born as outlined in table 1.3. If your child was born before 1 July 2023, the pay is for up to 18 weeks at the national minimum wage (currently $882.75 per week before tax) plus superannuation (from 1 July 2025) and is paid by either your employer or the government (where employers do not provide parental leave entitlements). For children born after 1 July 2023, the pay is increased by two additional weeks a year until it reaches a full 26 weeks for those that have children born after 1 July 2026. Table 1.3 also shows the minimum amount of days that are reserved for each partner, with the balance allowed to be divided between parents as they choose.
TABLE 1.3: paid parental leave
Source: © Services Australia https://www.servicesaustralia.gov.au/changes-if-you-get-family-payments?context=64479#pplchanges
Child's date of birth
Maximum paid parental leave
Minimum reserved for each partner
Before July 2023
90 days
10 days
1 July 2023–30 June 2024
100 days
10 days
1 July 2024–30 June 2025
110 days
10 days
1 July 2025–30 June 2026
120 days
15 days
After 1 July 2026
130 days
20 days
To be eligible you must have worked at least 330 hours across 10 of the 13 months prior to the birth of your child, but your annual salary must also be less than $168 865 (with a $350 000 family income limit if you do not meet the individual income test from 1 July 2023). The work test has been extended so that mothers can count periods of paid parental leave they've taken for earlier births as ‘work’.
TAX FACT
Paid parental leave is subject to income tax and may also affect other government benefits such as child support, health care cards and public housing. In contrast, the Newborn Upfront Payment and Supplement is not taxable and not considered income for family assistance or social security purposes. For more information on paid parental leave go to https://www.servicesaustralia.gov.au/individuals/services/centrelink/parental-leave-pay.
TAX FACT
Parents are prevented from ‘double-dipping’ into parental leave, where they have simultaneous access to employer-funded benefits at the same level or more than the government scheme. If the employer-paid leave is less, then they will only receive the difference.
TAX FACT
For children born after 1 March 2014, Family Tax Benefit Part A recipients may be entitled to a $641 Newborn Upfront Payment and up to $1924.65 for a Newborn Supplement (reduced to $1283.46 in total for subsequent children), payable via normal fortnightly payments over a three-month period. These payments are not taxable.
TAX FACT
The dad and partner pay is no longer available for those that have a child born after 1 July 2023. Instead it has been incorporated within the expanded paid parental leave for families.
6 CHILD CARE
Ask the parents of any young child and they will tell you that their biggest expense is child care. If you have a child who is attending child care services approved by, or registered with, the government you may be eligible for the Child Care Subsidy (CCS). You can apply for the benefit at the Family Assistance Office. The amount you receive will depend on the type and amount of care that you use, your income, the reason you are using care and the number of children that you have in care.
TIP
If you have identified that you were eligible for the Child Care Subsidy in previous financial years, but have not received it, you can lodge a lump-sum claim with the Family Assistance Office. You must do this within two years of the end of the financial year for which you are claiming.
As can be seen in table 1.4, families with combined adjusted taxable incomes under $80 000 will receive a Child Care Subsidy rate of 90 per cent of the hourly cap depending on the type of child care you use (shown in table 1.5), reducing by 1 per cent for each $5000 of income earnt by your family with no subsidy for family incomes over $530 000. There is no annual cap on the maximum amount of the subsidy that families can receive in a year.
TABLE 1.4: child care subsidy rates (2022–23)
Source: Services Australia https://www.servicesaustralia.gov.au/your-income-can-affect-child-care-subsidy?context=41186
Combined family income
Subsidy rate (up to hourly rate cap)
0–$80 000
90%
$80 001–$529 999
0%–90% (reducing by 1% for every $5000)
$530 000 and over
0%
TIP
Due to the complexity of the calculations associated with the CCS, it is recommended that you overstate your estimated income with Services Australia during the year. This will avoid the embarrassment of having to repay some (or all) of your CCS received at the end of each tax year should your actual income be higher than expected (for example due to extra hours/overtime, bonuses, pay increases or capital gains). You can vary your estimated income up to twice per year. Any excess will be refunded to you once your returns have been lodged. To assist, the government withholds 5 per cent of the CCS upfront during the year to reduce the likelihood of getting an overpayment.
TABLE 1.5: child care hourly rate caps (2023–24)
Source: Services Australia https://www.servicesaustralia.gov.au/type-child-care-you-use-can-affect-child-care-subsidy?context=41186#hourlyrate
Type of child care
Hourly rate cap
Centre-based day care
$13.73 per child
Family day care
$12.72 per child
After hours school care
$13.73 per child
In-home care
$37.34 per family
Given the complexity of the subsidy calculations that flow from tables 1.4 and 1.5 combined with fluctuating incomes, to reduce the risk of overpayment, Services Australia withholds 5 per cent of your child care subsidy upfront. When you submit your annual tax return, the Department will finalise the annual child care subsidy that was entitled to your family and pay any outstanding amount due to you.
TAX FACT
According to Services Australia, you may be eligible to claim the Child Care Subsidy if you:
had a child 13 or under and not attending secondary school
passed the work/training/study test
ensure that your children under seven either meet the Government's immunisation requirements or have an exemption
used approved child care such as long day care, family day care, in-home care, outside school hours care, vacation care and/or some occasional care services.
Parents can claim up to 100 hours of CCS per child per fortnight dependent on passing a work/training/study test. Once eligible, the rebate is paid weekly or fortnightly by Services Australia based on child care attendance information it receives electronically from your service provider. Even if your child is absent from child care, the Child Care Subsidy can still be paid in some situations. You can receive payments for up to 42 absences per financial year, if you are charged for child care. These absent days can be taken for any reason with no evidence required.
PITFALL
It is important to conservatively estimate your family income for the purposes of the Child Care Subsidy, because if you overestimate it you may need to pay back some or all of what you received during the year (even allowing for the 5 per cent amounts previously withheld by Services Australia).
PITFALL
Under the No Jab No Pay legislation, if your children (up to the age of 19) do not meet the immunisation requirements then you will not be eligible for Child Care Subsidy. Your child must be fully immunised, on a catch-up schedule or have a valid exemption in order to receive these payments. Note that while conscientious objection is not considered an exemption category, children with verified medical exemptions by a General Practitioner such as medical contraindication, natural immunity or participation in a recognised vaccine study are allowed.
7 LOW-INCOME EARNERS
There are a few tax benefits available if you are a low-income earner, such as when you work part time.
Low-income tax offset
The low-income tax offset (LITO) is a tax rebate for individuals on lower incomes. In 2024-25, the LITO will provide a tax rebate of $700 for individuals who earn less than $37 500. The offset is reduced by 5 cents for every dollar that your taxable income exceeds $37 500 up to $45 000. The offset is then reduced by 1.5 cents for every dollar that your taxable income exceeds $45 000, before phasing out entirely at $66 667.
To be eligible for LITO, you must be a resident for tax purposes and lodge a tax return. The ATO will automatically apply this offset to your assessment for you if you're entitled to it. Minors cannot use the LITO to reduce tax payable on their unearned income.
TIP
Low-income earners can effectively earn up to $22 575 each year tax-free after the LITO of $700 is taken into account. So if you have a spouse who is not working, consider an income-splitting strategy to save as much as $10 949 in tax.
Superannuation co-contribution
If your total superannuation balance is under $1.9 million and your total income is under the low-income threshold of $45 400 and you contribute $1000 post-tax to your super fund, the government will match it by 50 per cent with a further $500. The super co-contribution gradually phases out to nil (by 3.333 cents per dollar) at the higher income threshold of $60 400.
Superannuation spouse contribution tax offset
You are entitled to a rebate of up to $540 if you make contributions into your spouse's superannuation fund, if your spouse's assessable income and reportable fringe benefits are less than $40 000.
The rebate is 18 per cent of the lesser of:
$3000 reduced by $1 for every dollar that your spouse's assessable income and reportable fringe benefits exceed $37 000
the total of the eligible spouse contribution.
TAX FACT
The ATO outlines that tax offsets and tax deductions are not the same. Tax offsets are taken directly off your tax, while tax deductions are taken off your assessable income, which is used to calculate your tax. So each $1 of tax offset means you pay $1 less tax, regardless of your taxable income.
Low-income superannuation tax offset
The government will contribute up to $500 annually into the superannuation account of workers on adjusted taxable incomes of up to $37 000 to ensure that no tax is paid on superannuation guarantee contributions.
Low-income health care card
In order to receive a low-income health care card your weekly gross income over an eight week period needs to be under certain income limits depending on your family circumstances. If you are single with no children you can earn up to $769 per week (or $1315 for a couple with no children). This increases to $1315 if you have one dependent child ($1349 for couples) and a further $34 for each additional child. You do not need to pass an assets test.
8 SENIOR AND PENSIONER TAX OFFSET
Senior Australians or pensioners may be eligible for an offset that allows them to earn more income before they have to pay tax and the Medicare levy.
As we saw earlier, if you are under the pension age (currently 67 and increasing to 70 by 2035), you can earn an income of up to $22 575 before any tax is payable (see p. 15).
The tax rules get even better when you reach age pension age (or service pension age), as you may be able to access more generous tax-free thresholds, known as the senior and pensioner tax offset (SAPTO). Table 1.6 shows the thresholds for the SAPTO.
TABLE 1.6: thresholds for senior and pensioner tax offset (SAPTO) (2023–24)
Source: © Australian Taxation Office for the Commonwealth of Australia.
Maximum offset
Shaded-out threshold (taxable income)
*
Cut-out threshold (taxable income)
Single
$2 230
$32 279
$50 119
Couple (each)
$1 602
$28 974
**
$41 790
**
Couple (combined)
$3 204
$57 948
$83 580
Couple (separated by illness)
$4 080
$62 558
$95 198
* Maximum offset reduced by 12.5 cents for each $1 in excess of shaded-out threshold.
** A taxpayer's taxable income is taken to be half the couple's combined taxable income.
TIP
Senior Australians are not required to pay any income tax if their income is below $32 279 for singles (or $28 974 each for couples). But if senior Australians derive income from a share portfolio they are encouraged to lodge a tax return, as they will receive a nice refund from all of the excess franking credits attached to their dividends.
TAX FACT
If you're single, you can earn up to $32 279 (and $28 974 each for couples) in non-super income without paying a cent of tax because of the application of SAPTO and LITO. Any additional superannuation benefit that you receive from a taxed source is tax-free.
TIP
Senior Australians who are over Age Pension age but still participate in the workforce can keep more of their pension when they have earnings from working via the Work Bonus incentive. The Work Bonus allows an eligible pensioner to earn an extra $300 per fortnight from employment before it affects their pension rate. Single pensioners can effectively earn $504 per fortnight (being $300 from Work Bonus and the $204 income test free threshold) and still receive the maximum rate of pension.
Any unused part of the $300 fortnightly Work Bonus exemption amount can be accrued in a Work Bonus income bank, up to a maximum of $11 800. The income bank amount is not time limited; if unused, it can carry forward into future years.
TIP
Senior Australians who are not eligible for a pension due to their income or assets, may still be eligible for a Commonwealth Seniors Health Card provided that they continue to reside in Australia and their adjusted taxable income is below:
$95 400 a year if you're single
$152 640 a year for couples
$190 800 a year for couples separated by illness, respite care or prison
9 OTHER GOVERNMENT BENEFITS
There are so many different types of government benefits these days that it is no wonder some families are confused, and aren't claiming everything that they should be entitled to. Most entitlements are means tested, which means the benefits you receive are reduced as your income increases.
TIP
If you're in doubt when estimating your annual income, it is always better to overestimate. It can be difficult to repay a debt to Centrelink if you have already spent the cash!
Family Tax Benefit Part A
This benefit helps with the cost of raising dependent children and dependent full-time students under the age of 18. The amount of the benefit is determined by your family income as well as the number and age of your dependants. It will only be paid up to the end of the calendar year that your teenager is completing school.
Family Tax Benefit Part B
Restricted to families where the primary earner has an adjusted taxable income under $112 578 with at least one child under 13, this benefit provides extra assistance to families with one main income. The lower-earning parent can earn up to $6497 per annum before the benefit reduces. The Family Tax Benefit Part B fades out when the secondary earner receives more than $32 303 income per annum if the youngest child is under 5 (reducing to $25 149 if the youngest child is between 5 and 13).
Parenting payment
This payment provides financial help for people who are the primary carers of children. It is means tested on both your income and assets.
JobSeeker Payment
If you are unemployed, looking for work and aged between 22 and the Age Pension age (currently 67), or you are sick or injured and cannot perform your usual work then you may be eligible for the JobSeeker Payment from Services Australia. The maximum fortnightly payment varies depending on your family situation but ranges from $762.70 per fortnight for single jobseekers with no children to $987.70 per fortnight for single principal carers.
There will be a waiting period of between 1 to 13 weeks depending on how much you have in liquid assets and you will not be eligible for the JobSeeker Payment if your other income or assets are over certain amounts.
Income test
Individuals may be entitled to the full JobSeeker Payment if your other income is less than $150 a fortnight and your partner earns less than $2522 per fortnight. It phases out once you reach an income cut-off point (from $1453.50 if single with no children to $2666.25 if single and you are the principal carer of a dependent child with no mutual obligation requirements.
Assets test
Single homeowners must have assets other than their home worth less than $301 750, rising to $451 500 for a home-owning couple. These thresholds increase by $242 000 for non-homeowners ($543 750 for singles and $693 500 for couples).
Youth Allowance
The Youth Allowance is a government benefit paid to eligible students, apprentices or those looking for work aged 16 to 24. It is means tested based on both the young person's income and his or her parents’ income. The allowance is assessable and must be included in your income tax return. Unfortunately, Youth Allowance recipients cannot claim a tax deduction for expenses incurred in relation to their studies.
National Disability Insurance Scheme
People with a permanent or significant intellectual, physical, sensory, cognitive and psychosocial disability and aged between 9 and 65 may be eligible to receive support via the National Disability Insurance Scheme (NDIS). If you have a child less than 9 years old who has a developmental delay or disability, the NDIS has partnered with early childhood partners across the nation to deliver the Early Childhood Early Intervention program to assist.
Transition to work
Transition to Work provides pre-employment help to eligible young job seekers who are aged between 15 and 24 years, and are not involved in study or work. Eligibility is only available if the young job seeker does not have a Year 12 (or equivalent) or Certificate III qualification.
