1. Changes effective 1 July 2012 (i.e., 2012/13 income year)

1.1 Medicare levy low income thresholds

For the 2012/13 income year, the Medicare Levy low income thresholds will be as follows:

• Individuals $20,542 (previously $19,404)
• Families $33,693 (previously $32,743)

The additional amount of threshold for each dependent child or student will also be increased to $3,094 (previously $3,007). The Medicare levy threshold for single pensioners eligible to claim the new Seniors and Pensioners Tax Offset has been increased to $32,279 for the 2012/13 income year.

1.2 Superannuation – reduction of higher tax concessions for contributions of very high income earners – minor amendments

The government previously announced (i.e., in the 2012/13 Budget) that from 1 July 2012, broadly, individuals with ‘income’ greater than $300,000 will have their concessional contributions taxed at 30% and not at 15%. Refer to the Budget measure titled Superannuation — reduction of higher tax concession for contributions of very high income earners.

The government will make minor amendments to the above measure, which will also be effective from 1 July 2012. These amendments are estimated to have a gain to revenue of $25.2 million over the next four years.

These minor amendments include the following:

• Using a similar definition of ‘income’ for the measure to that used for calculating whether an individual is liable to pay the Medicare levy surcharge (i.e., ‘income for surcharge purposes’, which broadly includes a taxpayer’s taxable income, reportable fringe benefits total, reportable superannuation contributions and any total net investment loss).


• Refunding former temporary residents the tax paid under the measure as they effectively do not receive any concessional tax treatment on their contributions to superannuation as a result of the operation of other rules.

Editor: The government released exposure draft legislation on 1 May 2013 that provides further details of the above measure, which is available on the Treasury website.

2. Changes effective 1 July 2013 (i.e., 2013/14 income year)

2.1 Phasing out the net medical expenses tax offset (‘NMETO’)

The government will phase out the NMETO with transitional arrangements for those currently claiming the offset, as follows:

• Only those taxpayers who claim the NMETO for the 2012/13 income year will be eligible for the NMETO for the 2013/14 income year if they have eligible out of pocket medical expenses above the relevant thresholds. Similarly, only those who claim the NMETO in 2013/14 may be eligible for the NMETO in 2014/15.


• The NMETO will continue to be available for taxpayers for out of pocket medical expenses relating to disability aids, attendant care or aged care expenses until 1 July 2019 when DisabilityCare Australia (i.e., the national disability insurance scheme) is fully operational and aged care reforms have been in place for several years.

2.2 Superannuation – a fairer excess contributions tax system

As previously announced, the government will reform the system of excess contributions tax (‘ECT’) in respect of excess concessional contributions made from 1 July 2013, by allowing individuals to withdraw such excess contributions from their superannuation fund. Any such excess concessional contributions will then be taxed at an individual’s marginal tax rate, plus an interest charge to recognise that the tax on excess contributions is collected later than normal income tax.

This measure is estimated to cost the government $60.0 million over the next four years.

Under the current ECT arrangements, excess concessional contributions are taxed at the top marginal tax rate (46.5%) regardless of the personal marginal tax rate faced by the individual. In addition, individuals are only able to withdraw excess concessional contributions the first time they make an excess contribution after 1 July 2011, and only where that excess does not exceed $10,000.

Further information on this measure can be found in the joint press release of 5 April 2013 issued by the Treasurer and the Minister for Financial Services and Superannuation.

2.3 Superannuation – higher concessional contributions cap

As previously announced, the government will simplify the design and administration of the proposed higher concessional contributions cap, by providing a $35,000 concessional cap to anyone who meets certain age requirements, as follows:

• From 1 July 2013 (i.e., from the 2013/14 income year), people aged 60 or more will be able to access the higher $35,000 concessional contributions cap; and


• From 1 July 2014 (i.e., from the 2014/15 income year), people aged 50 or more will be able to access the higher $35,000 concessional contributions cap.

The new higher cap will not be limited to individuals with superannuation balances below $500,000 in light of feedback from the superannuation sector that this requirement would be difficult to administer. When the general concessional cap reaches $35,000 through indexation, it will apply to all individuals from that time forward. The general concessional cap is expected to reach $35,000 from 1 July 2018 based on current forecasts.

The simplification is estimated to save the government $366.1 million over the next four years.

Further information on this measure can be found in the joint press release of 5 April 2013 issued by the Treasurer and the Minister for Financial Services and Superannuation.

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