Recent Updates on Individual Tax 2011-12

Recent Updates on Individual Tax 2011-12

Posted on Jul 1, 2011 in Blog by jata 0 Comments

The main changes for individuals are:

1.   Tax discount on interest

From 1 July 2011 a discount of 50% of tax will apply on up to $1,000 of interest income earned by individuals. The discount will apply to interest income earned from a variety of sources such as bank deposits and bonds, both directly and indirectly (e.g. through a trust).

There is no suggestion that the amount of interest income to which this measure will apply is to be a net amount; that is, after offset of interest expenses incurred. This measure will provide a tax incentive to earn at least a certain amount of interest income from approved sources. If such interest is earned in a family trust it should be possible to ensure that a number of family members benefit from the 50% tax discount.

2.   Standard tax deduction

From 1 July 2012 individuals will be able to elect to claim a standard tax deduction of $500 (increasing to $1,000 from 1 July 2013) for work related expenses and costs of managing their tax affairs. If this election is made there will be no need to substantiate the deduction.  However, if the actual deductions are greater than the standard amount, the greater amount can be claimed instead subject to the substantiation rules.

This will greatly simplify tax return preparation for many individuals and leads the way towards a system where it may not be necessary to lodge very simple tax returns. Although the Government is not suggesting that this will be the case yet.

3.   Other measures

The budget also confirmed:

Personal income tax rates previously legislated for 2010 – 2011 will not be changed;

from 1 July 2010 the low income tax offset is increased to $1,500, effectively increasing the personal tax-free threshold to $16,000; and

from 1 July 2010 the medical expenses rebate threshold will increase to $2,000.