Budget 2013: Medicare Levy increase affects small business

The increase in the Medicare levy from 1.5 per cent to 2 per cent, will effectively bring the top marginal tax rate to 47 per cent. This will not only impact on individual taxpayers but will have a flow on effect to small businesses. A number of tax laws that businesses regularly comply with apply the top marginal income rate as a penalty rate of tax.

As a result, the following common tax items will be subject to tax of 47 per cent, up from the previous 46.5 per cent:

  • Fringe Benefits Tax (FBT)
  • TFN and ABN Withholding Tax
  • Family Trust Distributions Tax
  • Trusts, where Section 99A applies to retained income
  • Excess non-concessional contributions to super (with tax on excess concessional contributions to increase to 32%)