The debt levy, or the Temporary Budget Repair Levy as it is formally known passed the Senate in June 2014. This is something to keep in mind with end of financial year fast approaching and for tax planning strategies. The debt tax will apply from 1 July 2014 until 30 June 2017. The tax is payable at a rate of 2% on every dollar of a taxpayer’s annual taxable income over $180,000. In effect, the top marginal tax rate will become 49%. Taxpayer’s with taxable incomes of $180,000 or less will not pay the tax.
In conjunction with the debt tax, the Fringe Benefits Tax rate will increase to 49% to prevent anyone using the FBT system to avoid paying tax. The FBT rate will increase from 47% to 49% from 1 April 2015 until 31 March 2017.