Know Your Tax Offsets: Baby Bonus

I am still talking to women who were/are eligible for the Baby Bonus and had no idea! Don't miss out... know your tax entitlements or talk to someone who does.

What is it?

The baby bonus is a payment from the Tax Office you may be entitled to if you had a baby or gained legal responsibility for a child aged under five, between 1 July 2001 and 30 June 2004.

The baby bonus is a refundable tax offset – even if you do not pay tax, do not have any income or do not have to lodge a tax return you can still claim it. The baby bonus is paid whether or not you currently get any other family benefits.

Who qualifies?

If you had a baby or you gained legal responsibility of a child aged under five (for example, through adoption), after 30 June 2001 and before 1 July 2004 – whether or not you already have other children – you could receive the baby bonus. Usually, it is paid to the mother of the child. If you had a baby or you gained legal responsibility of a child aged under five (for example, through adoption), after 30 June 2004, you are not eligible for the baby bonus. You may be eligible for the new Maternity Payment which is administered by Centrelink.

How much is it?

How much baby bonus you get depends on your own taxable income each year. If your taxable income is $25,000 or less you will be entitled to an annual amount of $500. The ATO have an online calculator to help you work out your baby bonus.

Know Your Tax Offsets: Mature Age Worker

A relatively recent rebate is the Mature Age Worker Tax Offset.

What is it?
The mature age worker tax offset was introduced in the 2004-05 financial year to "reward and encourage" mature age workers who decide to stay in the workforce.

Am I eligible?
If you are an Australian resident, have received net income from working and are aged over 55 years, you may be eligible for the Mature Age Worker Tax Offset (MAWTO).

What is net income from working?
Your net income from working is used to calculate the amount of MAWTO you are entitled to. Basically, this is your income from working less any allowable deductions.

What income counts?
Income from working includes such items as salary and wages, income from a business you carry on, personal services income and reportable fringe benefits.

Which income doesn't count?
"Net income from working" does not include any social security payments, interest and dividends, super, capital gains, rental income or eligible termination payments. The amount of income you have received from the items not included as "income from working" does not affect your eligibility for this offset.

How much is it?
The maximum MAWTO entitlement is $500. This offset can only reduce your tax liability to nil; meaning any unused portion cannot be transferred or refunded.

How much will I get?
This depends upon your net income from working. The following rates apply depending on which bracket you fall into:

Under $10,000 = calculated at 5 cents per dollar from 0 - $9,999.
$10,000 - $53,000 = $500
$53,000 - $63,000 = reduced by 5 cents per dollar over $53,000.
Over $63,000 = nil

How do I get it?
If you qualify, the Tax Office will use the informaiton provided in your tax return to assess and apply your offset.

How Do They Work? "Tax Deductions"

A common misconception I hear people say regarding certain expenses or giving is, "it's okay, I'll get it all back at tax time." Well, that's not exactly true and, strictly speaking you do not "get it back" at all. So what does a deduction do...

How do deductions work?

A tax deduction reduces the amount of income you have to pay tax on. The Tax Office does not reimburse you for your expenses nor can you deduct these from your tax amount. Tax deductions are taken off your total income to get your 'taxable income' - the amount your tax is calculated on.

Income - Deductions = Taxable Income

Example:

Sally has income of $25,000. The tax payable on this amount is $2,850. Now suppose that Sally also has $400 in deductions. This reduces her taxable income to just $24,600. Tax payable on $24,600 is $2,790.

In this example, deductions of $400 have saved Sally $60 in tax (Sally is taxed at the 15% tax rate).

Please note this is a simplistic example given as a guide to understand how the deductions work and does not take into account other factors such as offsets previous losses, the Medicare levy, etc.

How much of a saving?

The individual tax saving as a result of deductions will vary depending upon what tax bracket a person is in. If your taxable income is less than $6,000 you would not receive any benefit from a deduction as your income is below a taxable level.

As the average Australian is in the 30% tax bracket, the best most of us can hope to recoop of our allowable deductions is just 30 cents in the dollar; better than nothing but a long way from "getting it all back at tax time."

Know Your Tax Offsets: Net Medical Expenses Over Threshold

Alan and I have three beautiful children ages 4, 6 and 8. Let's face it; children are expensive! Keeping track of some of these expenses can pay off when tax time comes around.

The Tax Office has found that many people are still not taking advantage of a large number of rebates.

20% Tax Offset on net medical expenses over the threshold

One of the most common areas people fail to take advantage is the medical expenses offset. This applies to out-of-pocket expenses (so deduct refunds from Medicare or your health insurer) over the $1,500 threshold. It sounds a lot but it is shockingly simple to reach that amount, especially with a young family or elderly dependents.

Who's included?

The offset applies to you and your dependants. If your household spent over the threshold on unreimbursed medical, you may be able to claim this offset.

What medical expenses count?

Medical expenses can include things like visits to your doctor, hospital, optical, dental, referred physio, prescription medication and even some counselling services.

How much will it be?

The offset amounts to 20% of the amount over the threshold. For instance, if our family had $4,000 of net medical expenses for the year, our offset would be $500 (4,000-1,500 =2,500 x 20% = $500).

It all adds up

It is not difficult for a family to go over the threshold (I single-handedly managed to get us up there just with a little dental work)! It is simple enough to access your medicare statement but you do should be aware of tracking the little things such as prescription medications - they just might be the tipping point to put you over the threshold.