Removing inefficient tax concessions...

The Government has undertaken a number of major reforms to strengthen the personal tax system and make it fairer.

A Stronger And Smarter Personal Tax System

The Government has reduced out-dated barriers to participation, reforming concessional offsets in the personal tax system to better reflect the realities of modern families. The dependent spouse tax offset (DSTO) is being phased out, with eligibility limited to taxpayers who maintain a spouse born before 1 July 1952. In addition, eight dependency offsets have been consolidated into a single streamlined and non-refundable offset, which further builds on this reform.

The Government is also phasing out the expensive and ineffective mature age worker tax offset (MAWTO), by limiting eligibility to taxpayers born on or before 1 July 1957, as announced in the 2012-13 Budget. Government reforms in the 2012-13 Budget provided more targeted and effective measures to encourage mature age workforce participation, including additional support for jobseekers, and expanded training opportunities.

In this Budget, the Government will phase out the net medical expenses tax offset (NMETO) over the next seven years from 1 July 2013. This offset dates back to 1936, long before our universal health system, and provides no direct assistance to the poorest Australians - those who pay no tax. The NMETO will continue to be available to taxpayers who incur expenses relating to disability aids, attendant care or eligible aged care expenses until 1 July 2019, when DisabilityCare Australia is fully operational and aged care reforms have been in place for several years. The Government is also capping the deduction for education expenses - which often provide a significant private benefit to the taxpayers.

A Fair Share For Everyone

The Government is committed to ensuring that high income taxpayers pay their fair share of tax. Recent measures supporting this aim include: removing minors' eligibility for the low income tax offset on unearned income; and limiting the tax concession on employment termination payments, or 'golden handshakes'. These reforms are in line with those to better target tax concessions for employee share schemes. By treating different forms of income equally, these reforms strengthen the tax system by reducing opportunities for high-income individuals to minimise their tax.

Cumulative savings from removing inefficient personal tax and FBT concessions