Tax Return Advice: Tax Tips for Mums and parents

At One Click Tax, we are passionate about finding ways to help Mums make every cent count. With tax season in full swing, we thought Mums rightly deserved their very own tax tips post.

Mums have an enviable knack for multi-tasking and holding an unfathomable amount of info in their heads. However, Mums can totally be forgiven for not knowing every detail on the ever-changing guidance on tax deductions, rebates and benefit rules! With time at a premium, we are sure the last thing on your mind when you catch a few minutes to yourself is tax advice. Let our tax experts help.

Check out our list of tax tips below for the 2017-2018

Do stay at home parents need to lodge a tax return?

As a stay at home parent, if you didn’t work during the tax year and didn’t earn an income, you won’t have to lodge a return. This is provided your taxable income was less than $20,542 for the year, you had no tax withheld/PAYG instalments, other income including dividends and distributions were less than $18,200 and you weren’t subject to income averaging rules.

Which income payments are exempt from tax?

Australian Government education payments made to children under the age of 16 are classed as exempt income and not taxable. The Child Care Benefit payment is also exempt income and is not taxable and the same applies to any child support and spouse maintenance payments you received.

What deductions can parents make?

Keep the receipts for donations to your children’s school – you are entitled to claim a deduction on your tax return for donations made to school building funds.

Remember that if you use your car for work, keep a log book AND keep all your expenses for the year. There are 2 methods of calculating motor vehicle expenses and having record of both will give you the option of selecting the best method to claim.

Take advantage of the Superannuation bumper and any spouse contributions

Don’t forget the government’s co-contribution to superannuation, helping Australians boost their retirement savings. If you’re a low or middle-income earner and make personal (after-tax) contributions to your super fund, the government also contributes $500 maximum. This is all done automatically if your super fund has your TFN so there is no need for the taxpayers to do anything.

If you didn’t work during the year or earned under $37,000 and your spouse made contributions to your Superannuation fund on your behalf, your spouse may be entitled to an offset for those payments in their tax return.

How does the Medicare Levy Surcharge work?

Children under the age of 21 and children aged 21-24 year of age who are full time students are classed as dependents for the purpose of calculating the Medicare Levy Surcharge. For every child after the first child, the income threshold for a family is increased by $1,500 from a base threshold of $180,000. This means for a family of 4, the Medicare levy surcharge will not be payable until the combined family income exceeds $181,500 for the income year. However, if the family maintains an appropriate level of private health insurance with hospital cover, the Medicare Levy Surcharge will not be payable at any level of income.

What is the Child Care Subsidy?

Under the new package, the current Child Care Rebate and Child Care Benefit will be replaced by a single Child Care Subsidy. It looks at 1) combined family income; 2) activity levels of parents; and 3) the type of child care being accessed. Stick with us here, we’ll explain each point.

Combined family income: Families earning $186,958 or less per year will have no cap on accessing the Child Care Subsidy. Families earning more than $186,958 and less than $351,248 will have an annual cap of $10,190 per year per child.

The percentage of child care fees or the relevant hourly rate (whichever is lower), the Government will contribute based on a family’s combined income:

Combined family income^ Subsidy rate*
Up to $66,958 85%
Over $66,958  to under $171,958 Gradually reducing to 50%
$171,958  to under $251,248 50%
$251,248  to under $341,248 Gradually reducing to 20%
$341,248  to under $351,248 20%
$351,248  or more 0%

Activity levels of parents: In two parent families, both parents must meet the activity test requirements – 3 steps of hours of activity and maximum number of hours of subsidy per child. Where the parents meet different steps on the activity test, the parent with the lowest entitlement determines the hours of subsidised care for the child.

Hours of activity* Maximum number of hours of subsidy per child*
1 8 hours to 16 hours 36 hours
2 More than 16 hours to 48 hours 72 hours
3 More than 48 hours 100 hours

“Activity” doesn’t always mean paid work. It can be e.g paid annual and parental leave; volunteering or undertaking unpaid work in a family business; self-employment, studying or attending training courses and job hunting.

The type of child care being accessed: An approved child care service must be used. Check out the Australian Government’s mychild website to see if the service is approved.

The maximum hourly rate the Government will subsidise is based on the type of child care service:

Service Type Maximum hourly rate cap
Centre Based Day Care (Long Day Care and Occasional Care) $11.77^
Family Day Care $10.90^
Outside School Hours Care (Before, After, and Vacation care) $10.29^
In Home Care $25.48^ (per family)

You will need to meet all eligibility criteria for Child Care Subsidy as well as extra criteria for In Home Care to qualify as an approved child care service.

Can parents salary sacrifice?

Salary sacrificing school fees and child-minding costs is a great way to reduce your overall taxable income as the costs will come from your pre-tax take home salary or wage. Speak to your employer about this if it is a possible option for you.

Ready to lodge your tax return online? Get $10 off with the code MUM10 to try One Click Tax. You won’t find an easier way to maximise your tax return. Click here to get started now!  Or if you’d rather speak over the phone to a tax consultant, just call us on 1300 707 117.

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