Federal Budget 2014-15: Personal tax

Insights

Federal Budget 2014-15

Personal tax

As expected, from a business taxation perspective, the Treasurer has continued to reposition existing tax policies with no major surprises or changes. The more important focus for business will be the White Paper on the Reform of Australia's Tax System, which will provide a longer term considered approach to tax reform and which is due prior to the next election.

Temporary Budget Repair Levy

The pre-Budget rumours around a temporary deficit levy are set to become a reality for individuals on the top marginal rate. From 1 July 2014 until 30 June 2017, what will formally be known as the Temporary Budget Repair Levy (TBRL), will be payable by individuals whose taxable income exceeds $180,000 at a rate of 2% on the excess over $180,000.

What impact will this have on income tax rates for resident individuals?

The TBRL is effectively a two percentage point increase in the top marginal rate. An indication of the additional tax payable under the TBRL is summarised in the following table.

Taxable income

Additional tax

180,000

Nil

200,000

400

250,000

1,400

300,000

2,400

350,000

3,400

400,000

4,400


As a legacy from the previous Labor Government, the tax-free threshold will increase from $18,200 to $19,400 from 1 July 2015. As a result, and including the TBRL but excluding the Medicare levy, the personal income tax rates for the 2014-15 and 2015-16 and later years are as follows:

2014-15

2015-16 and later years

Income range

Rate %

Income range

Rate %

0 - 18,200

0

0 - 19,400

0

18,201 - 37,000

19

19,401 - 37,000

19

37,001 - 80,000

32.5

37,001 - 80,000

33

80,001 - 180,000

37

80,001 - 180,000

37

180,001 +

47

180,001 +

47


Including the TBRL, but excluding the Medicare levy

Taking into consideration that the Medicare levy will increase from 1.5% to 2% from 1 July 2014, the top marginal rate plus the TBRL and the Medicare levy will be 49% for resident individuals.

What impact will this have on income tax rates for non-resident individuals?

2014-15

2015-16 and later years

Income range

Rate %

Income range

Rate %

0 – 80,000

32.5

0 – 80,000

33

80,001 - 180,000

37

80,001 - 180,000

37

180,001 +

47

180,001 +

47


The top marginal rate is effectively increased to 47% with the introduction of TBRL at two percentage points on taxable incomes exceeding $180,000.

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Stephen Coakley

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Peter Pagonis

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Peter is a Partner in Deloitte Private with more t...More

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Stephen Coakley

Partner, Tax, Global employer services

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Peter Pagonis

Partner, Deloitte Private

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