9. Is it a good idea to salary sacrifice into superannuation to reduce my tax bill?

If you salary sacrifice into superannuation this will attract a contributions tax of 15%. If your contributions exceed the threshold for that year, you will be taxed at a higher rate. With the new tax free threshold, as you are paying 19 cents in the dollar (plus Medicare) for any amount you earn over $18,200 this is greater than the 15% payable in contributions tax.

 

However, any amounts that are sacrificed into superannuation will now also be taken into account for the new income tests that determine liability to pay the Medicare levy surcharge and the entitlement to claim dependent tax rebates and pensioner tax offsets.

 

From 1 July 2012, if you have gone over your concessional (before-tax) contributions cap by $10,000 or less, you may receive a once-only offer to have the excess concessional (before-tax) contributions refunded to you and assessed at your marginal tax rate, rather than pay excess contributions tax.

 

From 1 July 2014, the concessional (before-tax) contributions cap will be indexed in line with average weekly ordinary time earnings (AWOTE), in increments of $5,000.

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10. I have started a second job. Is there anything that I need to do so that I don't end up with a tax bill at the end of the year?

Some people with two or more jobs or other tax income may be caught in an unintentional tax trap as a result of the new increased tax free threshold. The problem occurs even if the taxpayer and the employers do the right thing – as determined by ATO tax PAYG scales. The first job attracts the tax-free threshold while second and subsequent jobs are taxed in line with the progressive tax tables supplied by the ATO. It causes taxpayers to be, in effect, under-taxed on their ordinary earnings, which can result in a tax bill at the end of the financial year.

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11. I have had a large pay rise and am worried that I will now have to pay the Medicare Levy Surcharge. Is there anything I can do?

The Medicare levy surcharge is payable where your income is over a threshold amount and you do not have adequate private hospital insurance. The threshold amount for a single taxpayer is currently $90,000 and for families with up to one dependent child it is $180,000. If your income for surcharge purposes exceeds the relevant amount and you do not have private hospital cover, you will pay the surcharge.

 

Income for surcharge purposes includes your taxable income, exempt foreign employment income, investment losses as well as reportable fringe benefits and reportable superannuation contributions. The private health insurance rebate and the Medicare levy surcharge are income tested against three income tier thresholds. Higher income earners will receive less private health insurance rebate or, if they do not have the appropriate level of private patient hospital cover, the Medicare levy surcharge may increase.

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12. I have come to Australia temporarily to fulfil a two year contract with a local company. During the year I took out an Overseas Visitors Health Policy because I am only eligible for restricted benefits from Medicare. Will I have to pay the Medicare levy surcharge?

You are a temporary resident and, if your income for surcharge purposes is over the relevant threshold amount, you will be liable to pay the Medicare levy surcharge. The policy that you have is not sufficient to provide you with an exemption from the levy.