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Calculations of ATI by Family Assistance and C$A

I was under the impression these two agencies used exactly same formula to work out the ATI - but this is not the case.

Have been away from FLWG for a while but I am now back to look at this issue as it has come up recently. Glad to see FLWG still ticking over very well.

When a reportable fringe benefit is placed on a payment summary the employer has to provide a grossed up figure which virtually doubles the amount to what was actually paid by the employer. I guess this figure is used by ATO to work out a number of entitlements etc…, however when Family Assistance works out their ATI they reduce the grossed up reportable fringe benefit by 52% to get it back to the base amount. C$A on the other hand does not reduce the grossed up reportable to the base amount to work out their ATI.

On the surface this seems unfair as the base amount is the actual income earned by the employee and no the grossed up amount.

I tried talking to C$A about this over the phone the other day however the operator did not seem to understand what I was talking about so put me on hold to get further advice, after a few minutes 4:45pm came by and the phone call was terminated without notice.

Anyway I may have to get the write only thing happening with C$A again to get the bottom of this.

My question is can someone show me the legislative reference that states C$A do not have to use the base reportable fringe benefit amount to work out their ATI?

Fairgo,
          I believe the legislation only states that the "reportable fringe benefit total" as per :

Section 43(1) of the Child Support Assessment Act said
43  Working out parents adjusted taxable income
   (1)   Subject to this Part, a parents adjusted taxable income for a child for a day in a child support period is the total of the following components:
   (a)   the parents taxable income for the last relevant year of income in relation to the child support period;
   (b)   the parents reportable fringe benefits total for that year of income;
   (c)   the parents target foreign income for that year of income;
   (d)   the parents total net investment loss (within the meaning of the Income Tax Assessment Act 1997) for that year of income;
   (e)   the total of the tax free pensions or benefits received by that parent in that year of income;
   (f)   the parents reportable superannuation contributions (within the meaning of the Income Tax Assessment Act 1997) for that year of income.
Note 1:   Other provisions that relate to a persons adjusted taxable income are section 34A and Subdivisions B and C of Division 7.
Note 2:   The components of the definition of adjusted taxable income are defined in section 5
.

this then refers to section 5 of the Income Tax Assessment Act in regards to how this amount is determined (as per note 2).
Hi MikeT - that would imply the grossed up figure is used.

Here is Family Assistance legislation for working out the ATI:

2  Adjusted taxable income
             (1)  For the purposes of this Act and subject to subclause (2), an individuals adjusted taxable income for a particular income year is the sum of the following amounts (income components):
                     (a)  the individuals taxable income for that year;
                     (b)  the individuals adjusted fringe benefits total for that year;
                     ©  the individuals target foreign income for that year;
                     (d)  the individuals total net investment loss (within the meaning of the Income Tax Assessment Act 1997) for that year;
                     (e)  the individuals tax free pension or benefit for that year;
                      (f)  the individuals reportable superannuation contributions (within the meaning of the Income Tax Assessment Act 1997) for that year;
less the amount of the individuals deductible child maintenance expenditure for that year.

….and yes you can see the difference in regards to reportable fringe benefits.

I guess the next question to ask is why is this so? - Are there any tax gurus out there that can provide an answer?

Ok found something on this:

ERROR: A link was posted here (url) but it appears to be a broken link.
http://guidesacts.fahcsia.gov.au/guides_acts/fag/faguide-3/faguide-3.2/faguide-3.2.3.html

…"As part of the Child Support Scheme Reforms, the definition of income for FA was intended to change from 1 July 2008. The change was to move from using the net value to using the grossed up value of 'reportable fringe benefits' in working out FA payments. However, on 19 June 2008 the Government reversed the proposed change and legislation was subsequently passed to maintain the use of the net value (adjusted fringe benefits) for the purpose of FA."

If this had gone through a lot of low income earners who have access to salary packaging benefits due to working for a PBI (particularly women) would have had their Family benefit entitlement significantly reduced. I guess with the threat of Child Support being reduced at the same time the Gov had to soften the blow.

Now that I have brought this issue up I guess a policy maker out there will take the lead in an effort to cut costs and we'll see the changes to FA in the near future.

Last edit: by Fairgo

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