Australia – Legislation Enacted with New Levy Impacting Tax Liabilities

Australia – Legislation Enacted with New Levy Imp...

Recently enacted Australian legislation effectively raises the tax burden for individuals with annual taxable incomes exceeding A$180,000, by imposing a temporary levy. This temporary levy is to apply from July 1, 2014 to June 30, 2017, and will also be reflected in the Fringe Benefits Tax rate.

Related content

Australia’s so-called “temporary budget repair levy” of 2 percent, raising the tax burden for certain individuals, has been enacted.  On 25 June 2014, the package of 15 Temporary Budget Repair Levy bills received Royal Assent.  The additional income tax rate on annual taxable income exceeding A$180,000, will apply from 1 July 2014 to 30 June 2017.

Why This Matters

As we noted in Flash International Executive Alert 2014-057 (30 May 2014), the temporary budget repair levy will impact the rate of tax paid by individuals as well as the Fringe Benefits Tax rates over a number of years.  These changes are likely to raise tax burdens for certain employees (including those on international assignment subject to Australian taxation) and their employers, and will have an impact on payroll withholdings, tax equalizations, and international assignment budgeting and cost projections.

 

Background

  • The legislation, which cleared its final legislative hurdle in the Senate on 17 June 2014, amends the Income Tax Assessment Act 1997 (ITAA 1997), the Income Tax Rates Act 1986 (ITRA 1986), the Income Tax (Transitional Provisions) Act 1997 (IT(TP) Act 1997), and other taxation imposition and ratings acts.
  • A provision introduces a three-year progressive budget repair levy in the primary form of an additional 2-percent income tax on taxable income exceeding A$180,000 commencing in the 2014-15 financial year (starting 1 July 2014).  This will increase the top marginal tax rate for both Australian resident and foreign resident individuals from 45 percent to 47 percent.
  • The temporary budget repair levy will also be reflected in a number of tax rates that are currently based on the top personal marginal tax rate (45 percent), as well as those based on a calculation comprising the top personal rate and the Medicare levy (currently 1.5 percent, but legislated to increase to 2 percent from 1 July 2014), to maintain the integrity and ensure the fairness of the tax system, and minimize opportunities for avoiding the levy.  In particular, the Fringe Benefits Tax rate will increase from 47 percent to 49 percent for the period from 1 April 2015 to 31 March 2017.

Period Levy Is in Effect

As noted above, the temporary budget repair levy will apply from 1 July 2014 to 30 June 2017, and, therefore, is payable with respect to the 2014-15 financial year and the following two financial years.  

footnote

Footnote:

1  See the Bills and the Explanatory Memoranda at:  http://www.aph.gov.au/Parliamentary_Business/Bills_Legislation/Bills_Search_Results/Result?bId=r5239

For the legislation with the actual rate that applies (the 2 percent) is in the Bill at this link:

http://www.aph.gov.au/Parliamentary_Business/Bills_Legislation/Bills_Search_Results/Result?bId=r5238 .

 

For further information or assistance, please contact your local IES professional, or one of the following IES professionals with the KPMG International member firm in Australia:

Sydney                                                                  

Andy Hutt                                                              

+61 2 9335 8655                                                                

ahutt@kpmg.com.au         

 

Melbourne

Ben Travers

+61 3 9288 5279

btravers1@kpmg.com.au

 

Adelaide                                                                

Tim Sandow                                                        

+61 8 8236 3234                                                               

tsandow@kpmg.com.au      

 

Perth

Dan Hodgson

+ 61 8 9278 2053

dghodgson@kpmg.com.au

 

The information contained in this newsletter was submitted by the KPMG International member firm in Australia. The information contained herein is of a general nature and based on authorities that are subject to change. Applicability of the information to specific situations should be determined through consultation with your tax adviser.

 

© 2016 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

Flash Alert is an Global Mobility Services publication of KPMG LLPs Washington National Tax practice. The KPMG logo and name are trademarks of KPMG International. KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever. The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.

Connect with us

 

Request for proposal

 

Submit

KPMG's new digital platform

KPMG's new digital platform