On 1 May 2013, the Government announced that it would increase
the Medicare levy by half a percentage point from 1 July 2014 and
that the revenue from this increase would be directed to a new
fund, the DisabilityCare Australia Fund.
Importantly, a number of other tax rates that are linked to the
Medicare levy will also increase. On 13 May 2013, the Government
released exposure draft legislation and explanatory material to
implement the rate increase, including draft legislation that
provides for an increase in various other tax rates.
The 'domino effect'
Particularly significant for employers is the proposed increase
to the rate of tax in respect of the fringe benefits taxable amount
of an employer.
Currently, the tax rate under the Fringe Benefits Tax Act
1986 (Cth) is 46.5 percent. The Government has released
exposure draft legislation that, if the proposed reforms become
law, would result in the tax rate increasing to 47 percent. The new
tax rate would apply from 1 April 2014.
It will be important for employers to review their remuneration
packaging arrangements for employees and determine the financial
cost, if any, of the proposed increase in the tax rate. The tax
increase may also impact employees where the contractual
arrangements enable the employer to pass on the cost of the
provision of fringe benefits to the employer. In this case, it
would be prudent for an employer to advise its employees of any
increase in the amounts that they may be liable to pay.
An increase in the Medicare levy will also impact the PAYG
withholding obligations for employers and payers of employment
termination payments (ETPs). The Commissioner of Taxation has
published a withholding schedule in accordance with the
Taxation Administration Act 1953 (Cth) to provide guidance
on the PAYG withholding obligations that apply to ETPs. As the
withholding rates for ETPs include the Medicare levy, any increase
in the levy will have a corresponding effect on the PAYG
withholding obligations for ETPs.
Fringe benefits tax – under the spotlight
The proposed increase in the tax rate in respect of fringe
benefits follows on from a number of recent changes and proposed
reforms in the fringe benefits tax landscape including:
the significant reforms to the living away from home allowance
that came into effect in October 2012;
the proposed changes to the concessional treatment for in-house
fringe benefits accessed under a salary sacrifice arrangement, that
are currently before the Senate; and
the ongoing focus on the fringe benefits tax concessions
available to certain charities and not-for-profit
Further reforms may also be announced in the Federal Budget to
be released tonight. In terms of tax reforms for employers, it is
definitely a matter of watch this space!
Exemptions or concessions on stamp duty could apply when contemplating the purchase or transfer of NSW real estate.
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