Pam Roberts
Technical

New income tests for Government support and tax

By Pam Roberts – Technical Services Manager

In my other article in this edition of @dviser (see Reportable Employer Superannuation Contributions) we touched on new reporting requirements for salary sacrifice contributions. These requirements are related to new income tests that the Government will be introducing for government assistance, tax rebates, superannuation concessions and the Medicare surcharge.

The new income tests are set out in:

  • Tax Laws Amendment (2009 Measures No 1) Bill
  • Social Security and Veterans Entitlements Amendment (Commonwealth Seniors Health Card) Bill 2009.

The table below sets out the Government program, the income test that applies for this year (2008/09) and the changes to that test which apply to 2009/10 and beyond.

Key amounts that are included in the various income tests are:

  1. Taxable income (i.e. after tax deductions applied.)
  2. Assessable income (i.e. before tax deductions applied).
  3. Reportable superannuation contributions (a new inclusion from 1 July 2009). These are tax deductible personal superannuation contributions plus Reportable Employer Super Contributions.
  4. Reportable Employer Superannuation Contributions (RESCs) – a new inclusion from 1 July 2009. These are generally salary sacrifice superannuation contributions.
  5. Net total investment loss (a new definition).
    These are:
    (a) net losses from rental properties (already included in income tests)
    (b) net losses from financial investments (new inclusion from 1 July 2009)
  6. Reportable fringe benefits: these are fringe benefits that are reported to an employee on their annual payment summary. They are grossed up to include the FBT payable. Fringe benefits are exempt from tax are not reported.
  7. Adjusted fringe benefits: these are reportable fringe benefits adjusted down by an amount equivalent to the FBT component. To get the adjusted fringe benefits figure the ATO multiplies the reportable fringe benefit figure by 0.535 plus target foreign income.
  8. Target foreign income: this is foreign income that is not taxable in Australia or a fringe benefit.
  9. Tax free Social Security/DVA pension/benefit (less any deductible child maintenance expenditure).
  10. Tax free superannuation benefits (a new inclusion from 1 July 2009): this applies only to the Commonwealth Seniors Health Card. Tax-free superannuation income stream and lump sum benefits are counted in adjusted taxable income.
Government program Income test 2008/09 Income test 2009/10
Family Tax Benefit A & B

Childcare Benefit

Baby Bonus
  • Taxable income
  • Net rental property loss
  • Adjusted fringe benefits
  • Target foreign income
  • Tax free Centrelink pension or benefit
 
  • Taxable income
  • Net total  investment loss
  • Adjusted fringe benefits
  • Reportable super contributions
  • Target foreign income
  • Tax free Centrelink pension or benefit
 
Commonwealth Seniors Health Card Measured on “adjusted taxable income”   Adjusted Taxable Income
  • Taxable income
  • Net rental property loss
  • Employer fringe benefits >$1000 (not grossed up by FBT);
  • Target foreign income. 
Adjusted taxable Income
  • Taxable income;
  • Total net investment loss. 
  • Employer fringe benefits >$1000 (not grossed up by FBT);
  • Target foreign income
  • Reportable superannuation contributions
  • Tax free superannuation benefits received. 
Youth Allowance
  • Parental income test
 
  • Taxable income
  • Net rental property loss
  • Adjusted fringe benefits
  • Target foreign income
 
  • Taxable income
  • Net total  investment loss Adjusted fringe benefits
  • Reportable superannuation  contributions
  • Target foreign income
Child Support
  • Adjusted taxable income
Higher Education Support.
  • Repayment income
Student Assistance
  • Repayment income
  • Taxable income
  • Net rental property loss
  • Reportable fringe benefits
  • Target foreign income
  • Tax free Centrelink pension or benefit
  • Taxable income
  • Net total  investment loss (rental + financial investments)
  • Reportable fringe benefits
  • Reportable superannuation contributions
  • Target foreign income
  • Tax free Centrelink pension or benefit
Senior Australians Tax Offset (SATO)
  • From 1 July 2009 the income test for SATO will be determined on “rebate income”:
  • Taxable income
 
  • Taxable income plus
  • Reportable superannuation contributions; plus
  • Net investment loss; plus
  • Adjusted fringe benefits.  
 
Mature Age Workers Offset
  • Measured on “net income from working” will include RESCs.  
  • Salary and wages,
  • net personal services income,
  • net business income;
Excludes:
  • super lump sums, employer termination payments, unused leave payments and passive income. 
  • Salary and wages,
  • net personal services income,
  • net business income;
  • reportable employer superannuation contributions (RESCs). 
Excludes:
  • super lump sums, employer termination payments, unused leave payments and passive income. 
Spouse Contributions Tax Offset
  • Available if receiving spouse’s income < $13,800.
Deduction for Personal Super contributions
  • Less than 10% income must relate to being an employee
  • Assessable income,
  • Reportable fringe benefits
 
  • Assessable income,
  • Reportable fringe benefits
  • Reported employer superannuation contributions (RESCs)
 
Superannuation Co-contribution
  • 2 income tests apply for Super co-contributions:
Test 1:  At least 10% total income must come from business or employment income. 
Test 2:  The maximum co-contribution is payable if total income is less than $30,342 and the co-contribution ceases where total income exceeds $60,342.  .  		Test 1: 10% total income test. Total income is:
  • Assessable income for tax purposes
  • Reportable fringe benefits plus reportable employer super contributions. 
Test 2:  Dollar threshold
  •  Assessable income for tax purposes less deductible business expenses. 
  •  Reportable fringe benefits
Test 1: 10% total income test. Total income is:
  •  Assessable income for tax purposes
  •  Reportable fringe benefits
  •  Reportable employer super contributions. 
Test 2:  Dollar  threshold
  • Assessable income for tax purposes less deductible business expenses. 
  • Reportable fringe benefits
  •  Reportable employer super contributions. 
Medicare Levy Surcharge
  • Levied if no private health insurance and income exceeds $100,000 (single) or $150,000 (couple). 
  • From 1 July 2009 a new definition of “income for surcharge purposes” applies.  
  • Taxable income
  • Reportable fringe benefits
  • Net amount from trust where family trust distribution tax paid. 
Excluding
  • Taxable income from super lump sums
  • Taxable income
  • Reportable fringe benefits
  • Net amount from trust where family trust distribution tax paid. 
  • Reportable superannuation contributions
  • Total net investment loss
Excluding
  • Taxable income from super lump sums