New Income Tests

Source: Australian Taxation Office

From 1 July 2009, changes to tax law will mean changes to the way the Tax Office works out your income for some government benefits and obligations administered by the ATO and other government organisations.

The changes do not change the income thresholds or the way your assessable or taxable income is worked out. However, they may affect the amount of tax you are liable to pay as you may no longer receive a tax offset.

Three new income tests will be used when calculating tax offsets and obligations:

  • adjusted taxable income (ATI)
  • rebate income
  • income for surcharge purposes.

 

Adjusted Taxable Income

Your Adjusted Taxable Income (ATI) now includes your:

  • taxable income
  • adjusted fringe benefits (reportable fringe benefits x 0.535)
  • tax-free pensions or benefits
  • target foreign income
  • reportable super contributions
  • total net investment losses

 

Less

  • deductible child maintenance expensditure (child support paid).

 

Both Centrelink and the Child Support Agency use your ATI for their assessments, but the income components used to calculate ATI for each agency may differ. From 1 July 2009 the Tax Office will use your ATI to work out your entitlement to any dependant tax offset.

Rebate Income

Your rebate income includes your:

  • taxable income
  • adjusted fringe benefits (reportable fringe benefits x 0.535)
  • total net investment loss
  • reportable super contributions

 

From 1 July 2009, the Tax Office will use your rebate income to work out whether you are entitled to the senior Australians tax offset and the pensioner tax offset.

Income for Surcharge Purposes

The Tax Office will use your income for surcharge purposes to work out whether you have exceeded the Medicare Levy surcharge threshold.

Your income for surcharge purposes includes your:

  • taxable income (including the net amount on which family trust distribution tax has been paid)
  • reportable fringe benefits, as reported on the payment summary
  • total net investment loss
  • reportable super contributions

Less

  • if you are aged 55 to 59 years old, any taxed element of a superannuation lump sum, other than a death benefit, which you received that does not exceed your low rate cap.

 

If you had any exempt foreign employment income and a taxable income of $1 or more, you will need to add the exempt income to your taxable income.

If you exceed the threshold, this means you are liable to pay the Medicare levy surcharge. Income for surcharge purposes is only used to determine whether you are liable to pay, it isi not used to calculate how much surcharge you pay.

 

But, wait, there’s more…

 Several other income tests will be amended to include new items. These income tests include HELP repayment and SFSS repayments, superannuation income tests and the mature age worker tax offset.

As part of the changes, two new items will also be included in your income for income testing purposes. These are your reportable super contributions and total net investment losses.

 

This information is for guidance only and is not intended as specific advice to any reader. Professional advice should be obtained before acting on any information contained herein. The publisher accepts no responsibility for loss occasioned to any person or organisation as a result of action or the refrain of action as a consequence of the contents of this publication.