2nd Quarter 2015

If your taxable income is under the tax-free threshold of $18,200 you may still need to lodge an income tax return.

Common reasons for this include, if you:

• were entitled to the private health insurance rebate but did not claim your full entitlement as a premium reduction;
• had a reportable fringe benefits amount on your PAYG payment summary;
• had reportable employer superannuation contributions on your PAYG payment summary;
• made a loss or can claim a loss made in a previous year;
• had tax withheld from any income you received in 2013-2014;
• were an Australian resident for tax purposes and had exempt foreign employment income and $1 or more of other income; and
• were a liable parent or a recipient parent under a child support assessment unless you received one or more of Australian Government allowances, pensions or payments (listed in question 5 or question 6) for the whole year and your income was less than $23,523.

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As part of the 2014-2015 Federal Budget, the Government introduced a Temporary Budget Repair Levy. Individual taxpayers with a taxable income of more than $180,000 per year will have additional tax withheld by their employer, starting from 1 July 2014.

The levy is payable at a rate of two per cent of each dollar of a taxpayer’s taxable income over $180,000. It will apply to both resident and non-resident individuals from 1 July 2014 and applies to the 2014-2015, 2015-2016 and 2016-2017 income years.

In some cases the levy is payable even if you have a taxable income of $180,000 or less. For example, the unearned income of resident individuals under the age of 18 is subject to special rates and will include additional amount for the levy on income greater than $416.

The tax tables have been updated so that employers can withhold the appropriate amount of tax and levy. The levy will cease to apply from 1 July 2017.

If you are an individual taxpayer, the levy is calculated separate to your basic income tax liability. Most non-refundable tax offsets cannot be used to reduce your levy liability. Even if you have non-refundable tax offsets that exceed your basic income tax liability, you will still have to pay the levy. However, if you are entitled to the foreign income tax offset, it can be used to reduce your levy.

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The ATO is increasing its focus on rental property deductions.

Common errors made by rental property owners include:

• claiming rental deductions for properties not genuinely available for rent;
• incorrectly claiming deductions for properties only available for rent part of the year such as a holiday home;
• incorrectly claiming structural improvement costs as repairs when they are capital works deductions, such as re-modelling a bathroom or building a pergola; and
• overstating deduction claims for the interest on loans taken out to purchase, renovate or maintain a rental property.

The ATO has released a series of short videos which explain the tax implications of buying, owning and selling a rental property. Please visit their website for further information.

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SENIORS HEALTH CARD

From July 2014, The Department of Human Services will be undertaking a new data-matching program in which data of all current recipients of the Commonwealth Seniors Health Card (CSHC) will be matched with data of income tax returns (submitted within the last three financial years) held by the ATO.

This data matching will assist the Department to assess a CSHC recipient's ongoing eligibility for the card. Among other things, the program aims to prevent incorrect program outlays by identifying recipients and their partners with undisclosed and/or under-declared income, deter customers from neglecting to disclose income and promote voluntary compliance through public awareness of the program. It is intended that the CSHC data-matching activity will continue on an annual basis

ATO DATA MATCHING LETTERS

Each year, more than 600 million transactions are reported to the ATO by sources such as financial institutions, share registries, employers, companies, private health funds, state, territory and other government departments. The ATO matches this information, including details of income received, tax withheld and other tax-related data, to the details you provide on your tax return. If they find differences, they may send you a letter outlining the discrepancy.

The type of data-matching letter you receive depends on the type of discrepancy the ATO finds between the details provided on your tax return and data reported to the ATO by employers, financial institutions, companies, health funds and government agencies. Each letter issued will clearly show the financial year to which it relates, will also include a schedule for that financial year showing information from your tax return, the relevant data the ATO holds and the discrepancy found.

The data-matching letters the ATO issue may relate to:

Dividend income

If a company reports that they paid dividends to you, but this does not match the amount you declared in your tax return.

Employment income

If employers send the ATO details of payment summaries for salaries and wages that do not match the amounts you declared in your tax return

Government benefits

If details of benefits paid to you by the Department of Human Services and other government agencies do not match the amount you declared in your tax return

Interest income

If a financial institution reports that they paid you interest, but this does not match the interest amount you declared in your tax return.

Medicare levy surcharge

If the information the ATO receives shows that, for all or part of that year, you and all your dependants (including your spouse) were not a member of a registered fund, or did not have an appropriate level of private patient hospital cover.

Private health insurance rebate

The private health insurance (PHI) rebate is an amount the government contributes towards the cost of your private health insurance premiums. Your eligibility to receive a PHI rebate depends on your single or family income for surcharge purposes. You can receive the rebate upfront through a reduction in the cost of your premiums you pay to your insurer, or in the form of a refundable tax offset when you lodge your tax return. If the ATO receives information from Medicare Australia and your health fund that shows that you may not be entitled to the level of rebate claimed in your tax return.

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