Employee Share Schemes – further changes to tax treatment
The Government will make further amendments to the proposed changes to taxation of Employee Share Schemes (ESS) from 1 July 2016. The aim is to make ESS more accessible for Australian businesses and their employees, especially start-ups. This measure addresses:
- Excluding eligible venture capital investments from the aggregated turnover test and grouping rules (for the start-up concession).
- Providing the CGT discount to ESS interests that are subject to the start-up concession, where options are converted into shares and the resulting shares are sold within 12 months of exercise.
- Allowing the Commissioner of Tax to exercise discretion in relation to the minimum three-year holding period where there are circumstances outside the employee’s control that make it impossible for them to meet this criterion. ESS interests provided at a small discount by eligible start-up companies will not be subject to up-front taxation if they are held by the employee for at least three years.
Fly-in fly-out workers ineligible to the Zone Tax Offset
Fly-in fly-out (FIFO) workers whose normal place of residence is outside the remote ‘zone’ will be ineligible for the Zone Tax Offset (ZTO). Currently, workers whose normal place of residence is outside the ‘zone’ can benefit from the offset by working in a specified remote area for more than 183 days in an income year.
The Government says this measure is designed to better target the ZTO to people who have taken up genuine residence in remote zones.
Higher Education Loan Programme – recovery of repayment from overseas debtors
The Government will extend the Higher Education Loan Programme (HELP) repayment framework to debtors residing overseas for six months or more. People with a HELP debt will be required to make repayments if their worldwide income exceeds the minimum repayment threshold at the same repayment rates as debtors in Australia.
Increasing the Medicare levy low-income thresholds
The Government will increase the Medicare levy low-income thresholds for singles, families and single seniors and pensioners to take into account of movements in the Consumer Price Index. Taxpayers with taxable income below this threshold are exempt from paying Medicare Levy. These changes are to apply from 2014-15.
(The first column shows the current threshold and the second shows proposed.)
| Medicare low income thresholds Current | |||
| Individuals | $20,542 | $20,896 | |
| Married sole parent | $34,367 | $35,261 | |
| For each dependent child or student, add: | $3,156 | $3,238 | |
| Medicare low income thresholds – people entitled to seniors and pensioner tax offset Current | Proposed | ||
| Individuals | $32,279 | $33,044 | |
| Married sole parent | $46,000 | $46,0001 | |
| For each dependent child or student, add: | $3,156 | $3,238 | |
1 Assume no change to this threshold as it is not mentioned in the Budget papers.
Changes to tax residency rules for temporary working holiday makers
People who are temporarily in Australia for a working holiday will be treated as non-residents for tax purposes, regardless of how long they are here. This means they will be taxed at 32.5% from their first dollar of income. This measure is proposed to apply from 1 July 2016
Currently, a working holiday maker is treated as a resident for tax purposes if they satisfy the tax residency rules, typically that they are in Australia for more than six months. This means they are able to access the tax-free threshold, the low income tax offset (LITO) and the lower tax rate of 19% for income above the tax free threshold up to $37,000.
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