Temporary Budget Repair Levy on income over $180,000
Applies from 1 July 2014 to 30 June 2017
A levy of 2% will apply to an individual’s taxable income over $180,000 per annum for three years from 1 July 2014. In addition, the rate of Fringe Benefits Tax (FBT) will also increase to 49% to prevent high income earners from using fringe benefits to avoid the levy. The increase in the FBT rate will be from 1 April 2015 to 31 March 2017 to align with the FBT year.
A range of other tax rates that align with the top marginal rate are also expected to increase.
The levy amount expected to be paid by taxpayers with taxable income over $180,000 is summarised in the following table.
| Taxable Income | Temporary Budget Repair Levy |
| $200,000 | $400 |
| $250,000 | $1,400 |
| $300,000 | $2,400 |
GEM Capital Comment
As the Temporary Budget Repair Levy is proposed to apply to taxable income, strategies which reduce taxable income will result in a reduction in the amount of levy payable. This can be achieved by either reducing assessable income or increasing deductible expenditure.
It is also important to note that while the Temporary Budget Repair Levy is proposed to apply to high income earners, it could also potentially apply to people with income below $180,000 where they:
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- sell an asset and realise capital gains, or
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- take a superannuation lump sum benefit consisting of taxable component between the age of 55 and 59, as this amount will be included in the taxpayer’s taxable income and could push the client over the $180,000 threshold.
Taxpayers considering selling assets or taking superannuation lump sums between 1 July 2014 and 30 June 2017 may therefore need to take into account any additional levy they may incur as a result.