The Medicare levy increase – from 1.5% to 2% effective on 1 July 2014 – would result with a top marginal tax rate at 47% effectively. Apart from individual taxpayers, small businesses are also impacted because there are a number of tax laws that applies to businesses whereby the top marginal income rate is used to calculate the tax penalty charges.
Here are some common tax items that will be subjected to 47% tax rate, instead of the previous rate of 46.5%:
- Fringe Benefits Tax (FBT)
- TFN and ABN Withholding Tax
- Family Trust Distributions Tax
- Trusts, where Section 99A of the Income Tax Assessment Act 1936 (Cwlth) applies to retained income
- Excess non-concessional contributions to super (with tax on excess concessional contributions to increase to 32%).
Medicare levy increase affects small business