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2015-16 Legislative Updates: Rates, Allowances & Offsets

Posted by: ADP on 30 June 2015 in Compliance

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June 30 – by Angela Lehmann
Legislation Manager – Payroll & Tax, ADP Australia and New Zealand 

It has been an anxious few weeks holding out for some key legislative measures to be passed for the financial year commencing on 1 July 2015. Even still, some of the measures from the Federal Budget have not as yet been passed and the clock is ticking down towards the end of financial year. ADP has summarised some of the key tax and legislative measures relating to Rates, Allowances and Offsets below to help you keep track and plan for the 2015-16 year.

1. Individual Tax Rates 
In 2015-16 we were supposed to have an increase in the tax-free threshold from $18,200 to $19,400 and a rate change for the second marginal bracket to 33.5%.
However, on 18 June 2015 legislation was passed that rolled-back the tax cuts and thus the marginal tax rates from the 2014-15 financial year will flow on to the 2015-16 year as per the table below:

 Taxable income range

Tax Rate %

+ Medicare 

0 – 18,200

0

0

18,201 – 37,000

 19

 21

37,001 – 80,000

 32.5

 34.5

80,001 – 180,000

 37

 39

Over 180,000

 47

 49

Please note that the Temporary Budget Repair Levy of 2% was announced as part of the 2014-15 Federal Budget and applies to taxpayers with a taxable income which exceeds $180,000.
The levy applies for the 2014-15, 2015-16 and 2016-17 financial years and impacts the top marginal rate of tax. For ADP customers these tax tables have been updated in our payroll platforms. For non-ADP customers, ensure you consult your Accountant/payroll provider to ensure you have adopted these changes.

2. Low Income Tax Offset (LITO) 
The maximum value of the LITO will be remaining at $445 and the withdrawal rate of the LITO will be remaining at 1.5%. To be eligible for the LITO, the taxpayer’s taxable income for the 2015-16 year must be $66,667 or less. This offset is automatically calculated by the ATO when an individual lodges their income tax return.

3. Motor Vehicle Allowances (cents per km) 
In the 2015-16 Federal Budget it was announced that the rates for cents per kilometre claims will be consolidated into one flat rate of 66c per kilometre (regardless of vehicle engine size).
The ATO has updated it’s withholding from allowances document to include the new cents per kilometre rates and has clarified the tax treatment of such allowances:

1. When paying at or below the prescribed rate of 66 cents per km, the first 5,000kms are not taxed at the time of payment 
2. When paying about the prescribed rate, for travel less than 5,000kms, any amount in excess of the prescribed amount is taxed at the time of payment
3. Any kms over 5,000 are taxed at the time payment

Please note: The total value of the motor vehicle allowance (taxed and untaxed portion) must be shown in the ‘allowances’ box on the PAYG Payment Summary. For more information, please visit the ATO website at: https://www.ato.gov.au/Business/PAYG-withholding/In-detail/Allowances,-leave-payments-and-repayments/Withholding-from-allowances/

4. Weekly and Fortnightly payroll cycles in 2015-16 
In the 2015-16 financial year there may be 27 fortnightly pay periods (instead of 26) and 53 weekly pay periods (instead of the usual 52). 
The significance of this is that the tax tables published by the ATO are based on the standard year (26 fortnights and 52 weeks) and it may result in the amount of withholding not covering the amount of tax payable for employees when they lodge their income tax returns (depending on their financial circumstances).

Where an employee generally expects to receive a small tax refund, they may request from the employer to have additional tax withheld to overcome the possible shortfall. The additional withholding amounts are as follows:

Weekly earnings* 

Additional withholding per pay 

 $725 to $1,524

 
$3

 $1,525 to $3,449

$4

 $3,450 and over

 $10

 Fortnightly earnings*

 Additional withholding per pay

 $1,400 to $3,049

 $12

 $1,525 to $3,449

 $17

 $6,800 and over

 $42

To vary their withholdings by the above amount, an employee can give notice to their employer in any written format.

However, for any increases in withholding over and above these amounts, the employee would need to complete a Withholding declaration – upwards variation (NAT 5367).

5. HELP/SFSS Repayment Threshold
During the financial year commencing 1 July 2015, there is no repayment of HELP/SFSS required where the individual with the debt has repayment income of less than $54,126. Please note: There are a number of measures relating to subsidies and student contributions effective from 1 January 2016. For more information, please visit www.studyassist.gov.au.

6. Trade Support Loans Programme (TSL) 
The TSL is a loan scheme for apprentices. Just like other Government study assistance debts, the loan is repaid when the employee’s earn more than the minimum HELP/SFSS threshold.
From 1 July 2015, employers must withhold TSL (via HELP) from the employee’s wages to cover the debt.
Employees with TSL must advise their employer that they have a TSL debt by indicating that they have a HELP debt on the Tax File Number Declaration form for new employees or on the Withholding Declaration for existing employees.

These legislative updates are current at the time of publishing, however please be aware that there are a number of Bills before Parliament as well as the White Paper on the Reform of Australia’s Tax System being undertaken that may impact you also. We will endeavour to keep you updated on key changes as the information becomes available.

 

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