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Income Tax Rates

From the 1st July 2006, income tax rates have been adjusted to the following new rates for resident taxpayers:

Tax Rates 2005-06

Taxable Income

Tax on this income
$0 - $6000 Nil
$6,001 - $21,600 15c for each $1 over $6,000
$21,601 - $63,000 $2,340 plus 30c for each $1 over $21,600
$63,001 - $95,000 $14,760 plus 42c for each $1 over $63,000
Over $95,000 $28,200 plus 47c for each $1 over $95,000

Tax Rates 2006-07

Taxable Income

Tax on this income
$0 - $6000 Nil
$6,001 - $25,000 15c for each $1 over $6,000
$25,001 - $75,000 $2,850 plus 30c for each $1 over $25,000
$75,001 - $150,000 $17,850 plus 40c for each $1 over $75,000
Over $150,000 $47,850 plus 45c for each $1 over $150,000

Motor Vehicle Expenses

Rates per business kilometre

Engine Capacity

Cents per kilometre

Ordinary Car

Rotary engine car

2005-06 income year
1600cc (1.6 litre) or less 800cc (0.8 litre) or less

55 cents
1601cc - 2600cc
(1.601 litre - 2.6 litre)		 801cc - 1300cc
(0.801 litre - 1.3 litre)		 66 cents
2601cc (2.601 litre) and over 1301cc (1.301 litre) and over 67 cents

 

Superannuation - Co-Contribution

If you earn less than $58,000 a year, make personal superannuation contributions and are otherwise eligible, the Government will now give you a Super Co-contribution.

It means that if your total income for tax purposes is $28,000 or less a year, the Government will match your personal super contributions, up to $1,500 a year, on a dollar-for-dollar fifty basis.

When your income is more than $28,000 but less than $58,000 a year, your Super Co-contribution will be adjusted based on your income and how much you personally contribute.

However, you will not be eligible for the Super Co-contribution if you are eligible to claim a tax deduction for superannuation contributions (regardless of whether or not you claim the deduction).

For example, if you are a self-employed person you may be able to claim a tax deduction for superannuation contributions. If you are eligible to claim a deduction, you would not be eligible for the Super Co-contribution.

30% child care tax rebate

The 30% child care tax rebate covers 30% of your out-of-pocket child care expenses for approved child care, with a rebate of up to $4,000  (indexed) per child per year. Out-of-pocket expenses are the total fees you had to pay for child care expenses for approved care, less the amount of Child Care Benefit (CCB) you received.

Approved child care is care provided by a service provider that participates satisfactorily in the Australian Government's funded quality assurance system and has been approved to receive CCB payments on behalf of eligible families.

Examples of approved care can include:

  • long day care
  • family day care
  • in-home care
  • outside school hours care
  • vacation care, and
  • some occasional care services.

Family Tax Benefit (FTB)

FTB has two parts, Part A and Part B. Part A is designed to help with the cost of raising children. Part B is designed to give extra help to families with one main income, including single parent families. You may be eligible for Part A or Part B, or both.

Part A is paid for each dependent child you care for where the dependent child is aged under 21 years and for those dependent children ages 21 years to under 25 years who are studying full time.

Part B is a family payment (that is, it is not paid per child) and can be paid until the youngest child turns 16 years or until the end of the calendar year in which the youngest child turns 18 years - provided the child is studying full time and is not receiving a social security payment such as youth allowance or an education allowance such as ABSTUDY.

To be eligible to claim FTB you must satisfy the following three criteria:

  • You must have provided care to a dependent child
  • If you shared the care of the dependent child with another person who is not your current spouse, you must have cared for the child for a minimum of 10% of the assessment period. For example, if you shared the care over the whole 2005-2006 income year you must have cared for the dependent child for at least 37 nights of the income year.
  • You must have satisfied the residency requirements for family assistance purposes (see below). These differ from those required for tax purposes.

The amount of Part A you receive depends on your family adjusted taxable income (ATI). Your family ATI is the total of you and your spouse's ATI.

Part A family adjusted taxable income limit

 

Number of dependent children aged under 18 years
0 1 2 3

Number of dependent children aged 18 to under 25 years

 0 Not eligible $94,718 $104,317 $114,769
1 $96,081 $105,680 $116,131 $126,582
2 $107,043 $117,494 $127,945 $138,396
3 $118,857 $129,308 $139,759 $150,210

How does income affect your FTB Part B?

If you were a single parent at any time during the claim period your income will not affect your Part B entitlement for that time.

If you were a member of a couple, only the lower earner's adjusted taxable income (ATI) is taken into account when determining entitlement to Part B. Use the table below to work out if you are entitled to Part B.

Age of dependent child

Lower earner's income limit at which Part B stops being paid
Under 5 years

$21,572
5 to 18 years*

$16,790

* If your youngest child was aged 16 to 18 years at any time during the claim period you can only be entitled to Part B for that child if they were studying full time. If the child was 18 years you will be entitled to Part B until 31 December of the year they turned 18 years.

If you had a shared-care arrangement for any of your children, Part B is calculated for each eligible child and payment is based on the child with the highest rate.

Alienation of Personal Services Income – The 80/20 Rule

If you are part of a partnership, company or trust and obtain your work from one main client that incorporates 80% of your turnover, you may be taxed as an individual regardless of your entity setup. From July 1, 2000, businesses that fall within this category need to apply for a determination from the Australian Taxation Office if they wish to continue to distribute income to other parties. There are 3 main tests that need to be satisfied if you are to gain approval from the Tax Office.

The Unrelated Clients Test – you must provide services to 2 or more unrelated entities and the services provided must be a direct result of making offers or invitations to the public.

The Employment Test – you must engage one or more entities during an income year and they must perform at least 20% of the market value of the turnover for the year, or you must employ one or more apprentices for at least 50% of the income year.

The Business Premises Test – must be a premises that is used exclusively for producing personal services income, is physically separated from any other premises that is used for private purposes and must be physically separated from the premises of any of your clients.

If you cannot satisfy one of these tests it is unlikely that a positive determination will be issued. There are a few exceptions to the rule, however application must still be made. If you do not pass the relative tests, personal services income will be declared in the tax return of the person performing the work and only certain deductions will be allowed.

Non Commercial Losses - Deferral of Deductions

As from the 2001 Income Year, tax losses incurred by individuals (sole traders) or partners of a partnership from carrying on a business will not be deductible against other income unless the following can be satisfied:

  1. The Business meets one of the following tests:
    • Assessable Income Test – the business earns assessable income of at least $20,000
    • Profits Test – the business has produced a taxable income in 3 out of the last 5 years
    • Real Property Test – the value of the real property (e.g.. land & buildings) used in the business is at least $500,000
    • Other Assets Test – the value of other assets used in the business is at least $100,000 (excluding motor vehicles)

OR

  1. The sole trader or partner can satisfy the exception of being a primary producer or a professional artist where the individual’s assessable income from other sources (e.g.. wages) is less than $40,000;

    2. OR

  2. The Commissioner has exercised his discretion to allow the tax loss to be deducted. This generally may be granted in one of the following situations:
    • special circumstances – where the business has been affected by circumstances out of it’s control (e.g. drought, flood, fire etc.); or
    • due to the nature of the business, it is not expected to generate a profit for a certain period of time (e.g. olive farm etc)

If the above tests cannot be satisfied, then the losses made from the business will not be deductible against other income and must be deferred until the business actually makes a profit. Once a profit is generated by the business, it may then deduct its carried forward losses from previous years. The tests must be evaluated each year to determine whether there will be a deduction allowed or not.

Depreciation/Capital Allowances

There have been significant changes to the Depreciation regime over the past few years. In brief, deductions will be allowed as follows:

Employees & Landlords

Taxpayers may elect to depreciate items of plant costing less than $1000 through a low-value pool at a diminishing rate of 37.5%. Any new items added to the pool during an income year will be depreciated at 18.75%. The immediate write-off for items under $300 still applies where certain conditions are met. If the low-value pool is not elected, then items of plant will be written off on the basis of effective life – new rates apply depending on when the asset is purchased.

Small Business Taxpayers

Small Business Taxpayers that elect to enter the Simplified Tax System (STS) are allowed an immediate write-off for Low Cost Assets costing less than $1000. Other assets can be written off through a General Depreciation Pool at a diminishing rate of 30% (effective life of asset must be less than 25 years). However, new assets added to the pool during an income year are only eligible for a 15% deduction in the first year regardless of when the item is purchased. Assets with an effective life of longer than 25 years may be allocated to a Long Life Pool with a rate of 5% (2.5% in the first year).

Capital Gains

Legislation introduced on 11am 19th September 1999, entitles individuals to a 50% exemption (discount) on a capital gain if the asset has been held for more than 12 months and is sold after 19th September 1999. There is a choice between calculating the gain/loss by using indexation method (frozen at September 1999 quarter) or the discount method. This option is also available when gains flow down to beneficiaries through a trust distribution but is not available to companies. Super Funds are eligible for a discount of 1/3 of their gain.

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