According to tax experts, people earning over $180,000 will have nine months to salary-package to avoid the debt levy, and take advantage of the loop hole.
Treasurer Joe Hockey, last week announced the 2 per cent tax on taxable income over $180,000 starting in July (next financial year), taking the top marginal tax rate to 49 percent.
A loophole has risen from a leeway given by the Coalition in the budget last week. The fringe benefit tax is to stay at 47 percent till April 2015, presenting a nine-month opportunity that tax advisors are jumping on.
“Salary packaging may come back into vogue.”
An individual who is earning $200,000 could package the $20,000 cost of a new car lease, including running costs (for example, petrol, repairs, registration/CTP), to reduce their income to $180,000. The individual is now below the $180,000 threshold and the debt levy will not apply.
Those who can salary-package can achieve better tax outcomes than others when tax rates change.
Michael Crokers, head of tax policy at the Institute of Chartered Accountants
CPA Australia’s head of policy, Paul Drum said “The government’s planned three-year debt levy is in fact a two-year debt levy for some who avail themselves of smart tax planning.” Tony Greco a senior tax advisor at the Institute of Public Accountants said that the “taxpayers with incomes over $180,000 generally have access to good advisors”. In other words, the income earners over $180,000 will be taking advantage of this and other “loopholes”.
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