Tax Tip 197: How much can be earned without having to pay tax?

Discussion in 'Accounting & Tax' started by Terry_w, 9th May, 2019.

Join Australia's most dynamic and respected property investment community
  1. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker Business Member

    Joined:
    18th Jun, 2015
    Posts:
    25,832
    Location:
    Australia wide
    For the 2018 to 2019 tax year the tax free threshold for resident taxpayer individuals is $18,200 per year in taxable income. That means earning under this amount results in no income tax payable.

    However, a taxpayer could earn slightly more than this and pay no tax because of 2 rebates that are available:

    · The Low Income Tax Offset of $445, and

    · The Low Mid Income Tax Offset of $255.



    This means that an individual resident individual could actually earn $21,885 per year and not have to pay tax.

    However, if the individual is eligible for the Seniors and Pensioners Tax Offset (SAPTO) they could potentially earn up to $33,000 per year and not have to pay tax.



    Check out the calcs at https://www.taxcalc.com.au and pay calculator
     
    Anne11, BarneyRubble, kierank and 2 others like this.
  2. Paul@PFI

    [email protected] Tax Accounting + SMSF Business Plus Member

    Joined:
    18th Jun, 2015
    Posts:
    11,978
    Location:
    Sydney
    Older Australians may be able to raise their tax free threshold to around $25K each in some cases using the Senior Australian Pension Tax Offset (SAPTO)

    Senior Australians

    Its a kind of 4x dip for some retirees even with modest shareholdings. They get a elevated tax threshold, tax free super, tax free earnings in the super fund and also refund of franking credits. Its another reason why the ALP policy on franking credits has elements of sense.
     
  3. oracle

    oracle Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    940
    Location:
    Canberra
    Why not remove the FREE part and levy a modest tax rate to make it fair instead of tinkering with franking credits which certain people (on high incomes) or retirees with industry super fund can fully utilise but not low income earners and SMSF retirees? Where is the fairness. I think it is highly political and biased policy.

    Don't want to derail the thread but I just don't see the fairness in their policy when there are so many loopholes to avoid or get around it.

    Cheers,
    Oracle.
     
    willy1111 and kierank like this.
  4. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker Business Member

    Joined:
    18th Jun, 2015
    Posts:
    25,832
    Location:
    Australia wide
    would be easier to just add GST to everything
     
    ChrisP73, Islay and kierank like this.
  5. Chomp

    Chomp Well-Known Member

    Joined:
    19th Jun, 2015
    Posts:
    206
    Location:
    Perth
    I thought you could earn an extra 5k a year tax free if it was a hobby ?
     
  6. datto

    datto Well-Known Member

    Joined:
    23rd Jun, 2015
    Posts:
    3,603
    Location:
    Mt Druuiitt
    Tax the big companies properly and no body else would need to pay any tax.
     
    ChrisP73 and Islay like this.
  7. Paul@PFI

    [email protected] Tax Accounting + SMSF Business Plus Member

    Joined:
    18th Jun, 2015
    Posts:
    11,978
    Location:
    Sydney
    And this year there is middle income tax offset. I cant even start to think about that one.
     
  8. Paul@PFI

    [email protected] Tax Accounting + SMSF Business Plus Member

    Joined:
    18th Jun, 2015
    Posts:
    11,978
    Location:
    Sydney
    Wrong. All income is taxable. If its a hobby it may not be income but generally that rule limits deductions to the extent of income.

    referees....Hmmm depends if they are professional semi pro or a district ref. The ones who ref kids games are all tax free. But they also cant claim deductions. NRL / AFL refs are usually taxed. World Cup games are taxed but tax free for Olympics.... Who said tax was easy

    Scholarships are often taxable. I see that with teachers a bit. They win a scholarship to study or travel and research and whammo. Typically only Uni scholarships are tax free
     
    Chomp likes this.
  9. Paul@PFI

    [email protected] Tax Accounting + SMSF Business Plus Member

    Joined:
    18th Jun, 2015
    Posts:
    11,978
    Location:
    Sydney
    The fairness is in making it a non-refundable offset. Personally it should be same for ALL entities and taxpayers. If a SMSF is a pension fund the refund is denied. If it is accumulation its allowed to the extent of tax due. Shortens backflip on this was sign that he will need to cave on most policies and he will. He will be a puppet. Who knows where this will go.
     
  10. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker Business Member

    Joined:
    18th Jun, 2015
    Posts:
    25,832
    Location:
    Australia wide
    I just reran the numbers for the 2019-20 financial year and the figures are still the same - $21,885 can be earned without needing to pay income tax.
     
    Silverson, Anne11 and ff3 like this.
  11. thesuperman

    thesuperman Well-Known Member

    Joined:
    27th Jun, 2015
    Posts:
    385
    Location:
    Somewhere
    Do kids who get a scholarship to a private school also have to report & pay tax on their scholarship? That would be a bit harsh imo.
     
  12. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker Business Member

    Joined:
    18th Jun, 2015
    Posts:
    25,832
    Location:
    Australia wide
    I am not sure - it could be in many instances.
     
  13. Paul@PFI

    [email protected] Tax Accounting + SMSF Business Plus Member

    Joined:
    18th Jun, 2015
    Posts:
    11,978
    Location:
    Sydney
    Terry_w likes this.