What's new in tax this year?

If you are one of the Rudd Government's working families on $80,000 a year, then you can expect an extra $1100 in your pay packet next financial year. And if the $80,000 comes from the combination of two pay packets in your household rather than just one breadwinner, you'll be even better off.

Because of the increase in the tax brackets, a couple where one earns $55,000 and the other $25,000 for a combined $80,000 will be $1250 better off. The lower income earner will have $450 more in their pay packet and the higher income earner will have $800.

This compares with the sole breadwinner on $80,000 who will have $1100 more come July 1 when the tax thresholds are raised. The better position for the working couple is because of the increase in the low income tax offset which will impact on both their salaries. The new tax changes will be further refined in the subsequent two financial years.

From July 1, the zero tax applying to the first $6000 you earn will remain and then tax kicks in at 15 percent. The threshold when tax rises to 30 percent will move up from $30,000 to $34,000. The threshold for the 40 percent tax rate will move up from $75,000 to $80,000. The top marginal tax rate of 45 percent will not kick in until you are earning more than $180,000 — some $30,000 higher than the current top threshold.

Given that marginal tax rates are falling, it makes sense to defer income payments if you can until the 2008-09 financial year so that the tax office gets less of the take. And if you can bring forward deductible expense to the current financial year, you may also be better off. Prepaying interest on your margin loan and paying for a year's income protection insurance premiums in advance are two common examples.

Medicare surcharge

From July 1, the threshold for being hit with the 1 percent Medicare surcharge for not having private health insurance is being raised from $50,000 to $100,000 for singles and from $100,000 to $150,000 for couples.The move is expected to see a lot of Australians dump their private health insurance.

But Deborah Wixted, senior technical services manager at Colonial First State, says you need to be careful that you don't give up your private health insurance without thoroughly checking what your level of taxable income is.

For instance, taxable capital gains you earn from selling shares or an investment property will increase your taxable income. And under a budget proposal from July 1 this year, you will not be able to use losses from investment to reduce your taxable income to a level under the Medicare surcharge threshold.

First home fund

As the new financial year rolls in, you might turn your attention to saving for your first home. Come October, the government is introducing its first home savers account, where you can enjoy a co-contribution from the government by making a minimum contribution of $1000 a year for at least four years. The years do not have to be consecutive.

The co-contribution will be a flat 17 percent of the first $5000 contributed each year to a first home saver account, which is equal to a handout of $850. Earnings on investments in the account will be taxed at 15 percent rather than the saver's marginal tax rate. This is similar to the tax on earnings in a superannuation account. Contributions cannot be made once the account reaches $75,000.

Higher SG contributions

Some Australians may find that they are receiving higher superannuation guarantee payments from July 1. This is because the superannuation guarantee (SG) will be universally calculated as 9 percent of ordinary time earnings. Up 'til now some employers have calculated with a lower earnings base contained in an industrial award, an existing agreement, a trust deed or a law. Wixted says this could see some employees receive higher SG payments into their super.

Family rebates

From July 1, the childcare tax rebate will rise from 30 percent to 50 percent, which will increase the rebate limit from $4354 to $7500 per child. The payments will also be rebated quarterly rather than annually. This July the baby bonus will rise to $5000, but come January 2009 the payment will be means-tested and those with a family income of more than $75,000 in the six months following the birth of a baby will not qualify. Rather than a lump sum, it will be paid fortnightly.

You may be able to claim a 50 percent refund every year for up to $750 of education expenses for each child at primary school and up to $1500 for each secondary school child. However, according to Andrew Lawless, technical manger at MLC, not everyone will receive the education tax refund as you also need to qualify for family tax benefit-Part A.

FBT changes

The FBT year runs from April 1. Work-related items such as laptops, electronic diaries, personal digital assistants and briefcases will only be FBT-exempt when used primarily for work purposes. Salary sacrificing the cost of your lunch at work will now be subject to FBT, although any existing balance on meal cards will remain exempt until 2009.