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How does the Federal budget affect income?

The budget says that any salary sacrificed income into superannuation etc. will be included in income assesments. What are the impacts of the Federal Budget on Child Support payments and calculations?

So the Rudd government announced on Tuesday last, that all income is to be used in determining access to government benefits i.e. family tax benifit part B and other benifits.

It states that any salary sacrificed income into superannuation etc. will be included.  CSA currently uses your taxable income + any FBT to determine the income.

Will this now also include salary sacrificed items?

Personal tax and benefits - Price Waterhouse Coopers

I have posted the full article in case they change their web site url….

Income tax cuts on track

Legislation to implement the tax cuts promised during the Federal Election was introduced into Parliament on 14 February 2008, and the Bill is currently before the Senate. The following tables below summarise the tax rate scales that will apply to resident individual taxpayers aged over 18 years of age from 2008-09 to 2010-11.

Although these tax cuts were given additional air play in the Federal Budget, no new tax cuts were announced by the Treasurer in his Budget speech.

The tax comparison for the 2007-08, 2008-09, 2009-2010 and 2010-11 years is set out in Table 4.

Table 3: New tax rates

Tax rates 2008-09*

Taxable incomeTax on this income
$6,001-$34,00015c for each $1 over $6,000
$34,001-$80,000$4,200 plus 30c for each $1 over $34,000
$80,001-$180,000$18,000 plus 40c for each $1 over $80,000
$180,001 and over$58,000 plus 45c for each $1 over $180,000

Tax rates 2009-10*
Taxable incomeTax on this income
$1-$6,000 Nil
$6,001-$35,000 15c for each $1 over $6,000
$35,001-$80,000 $4,350 plus 30c for each $1 over $35,000
$80,00-$180,000 $17,850 plus 38c for each $1 over $80,000
$180,001 and over $55,850 plus 45c for each $1 over $180,000

Tax rates 2010-11*
Taxable incomeTax on this income
$1- $6,000 Nil
$6,001 -$37,000 15c for each $1 over $6,000
$37,001- $80,000 $4,650 plus 30c for each $1 over $37,000
$80,001-$180,000 $17,550 plus 37c for each $1 over $80,000
$180,001 and over $54,550 plus 45c for each $1 over $180,000

* The above rates do not include the Medicare levy of 1.5%

Table 4: Personal income tax cuts – comparison chart*

Taxable income

* Excludes Medicare levy and any tax offset entitlements

Changes to tax rules on employee share schemes

In a confusing series of media reports earlier this month, it was revealed that the Federal Government had plans to change the tax law for members of Employee Share Schemes (ESS).

According to the Budget night press release to clarify the matter, two legislative changes will be made to the taxation treatment of shares or rights acquired under an ESS in respect of shares and rights acquired from 1 July 2008.

1. Election requirements

The first change is to the election requirements to access one of two tax concessions available to taxpayers who acquire qualifying shares or rights under an ESS. This change will improve the integrity of the law by ensuring taxpayers appropriately report income in their tax returns.

Currently, taxpayers may choose between the following two tax concessions in relation to shares or rights acquired under a qualifying ESS:

  • a tax-upfront concession where a taxpayer is only assessed on any discount provided by an employer on the shares or rights in the income year they are acquired, that is in excess of $1,000, or

  • a tax-deferred concession where a taxpayer can defer taxation which generally is the earlier of 10 years or when any restrictions or conditions placed on the shares or rights are lifted.

Under the current election requirements, a taxpayer should complete a written election (which is retained by the taxpayer) before lodgment of their income tax return for the year in which the shares or rights are acquired. The choice of concession is intended to be final. However, some taxpayers have sought to change their choice in a later income year by claiming that an election to be taxed on grant was made. In this manner, depending on market conditions, they can reduce their tax liability.

The election procedures will be changed, so that a taxpayer who wishes to make an election to be assessed under the taxed-upfront concession, must include the value of the discount in the taxpayer's income tax return for the year of income the shares or rights are acquired (where it exceeds the $1,000 exemption amount available under the taxed-upfront concession). If a taxpayer does not include an amount in their income tax return in the year the shares or rights are acquired, then they will be taken to have chosen to be taxed under the tax-deferred option.

The change will improve the integrity of the taxation system by removing the ability for taxpayers to manipulate the taxing point and ensure that discounts provided on shares or rights under an ESS are properly included in their assessable income.

2. Removing double taxation

The second change is to remove double taxation that arises in relation to certain ESS that use an employee share trust. This change will improve flexibility in the manner shares or rights can be prescribed to employees under an ESS. It will provide the trustee (or beneficiary) of the employee share trust with capital gains tax (CGT) relief when an employee, on the exercise of rights, becomes absolutely entitled to the shares held in the trust.

The changes will take effect in relation to CGT events occurring from 7.30 pm (AEST) on 13 May 2008.

New limit on tax deduction for interest on capital protected borrowings

For capital protected borrowing arrangements entered into after 7.30pm (AEST) on 13 May 2008, the interest component for tax deduction purposes is to be capped at the Reserve Bank of Australia's indicator variable rate for standard housing loans. Interest expense in excess of this cap will not be tax deductible. The current law, which applies the Reserve Bank of Australia's indicator variable rate for personal unsecured loans to determine the cap, will continue to apply to capital protected borrowing arrangements existing before the above time, for a period of five years or the life of the project, whichever is the shorter.

Reversal of the previous Government's family trust concessions

Two family trust concessions introduced by the previous Federal Government are to be reversed.

Firstly, the definition of family in the family trust election rules will be amended to limit lineal descendants to children or grandchildren of the test individual or of the test individual's spouse. This change will have effect from 1 July 2008.

The further change is that from the 2007-08 income year, family trusts will be prevented from making a once off variation to the test individual specified in a family trust election (other than in relation to a marriage breakdown).

According to the Federal Government's announcement, both of these changes will reduce the scope for family trusts to utilise tax losses to lower income tax payable.

Guidelines for prescribed private funds

A prescribed private fund (PPF) is a trust to which tax deductible gifts can be made for the purposes of disbursing funds to a range of deductible gift recipients. A trust is prescribed as a PPF by regulation. From 1 July 2009, the integrity of PPFs will be enhanced by improving transparency and providing trustees with greater certainty of their philanthropic obligations through amending and legislating the PPF guidelines. The changes will amongst other things give the ATO greater powers, ensure regular valuation of assets at market rates and increase the rate of compulsory distributions. The Federal Government has stated that the changes will not impact on the ability of taxpayers to give tax deductible donations directly to a deductible gift recipient.

Fairer means-testing of Government support programs

From 1 July 2009, income tests used to determine eligibility for Government financial assistance programs will be tightened to include forms of non-wage remuneration and, where appropriate, losses from discretionary activities.

The changes will mean individuals who have access to salary sacrifice to reduce their taxable income will be treated on an equivalent basis to those who do not have access to salary sacrifice arrangements.

Salary sacrifice contributions to superannuation will be assessed as income for all relevant tax and transfer programs (which include family assistance, child support and income support payments for customers below pension age).

Individuals will continue to have access to tax benefits that accrue through salary sacrifice however these will no longer automatically flow through to the assessment of means tested personal benefits and tax offsets.

Reportable fringe benefits will also be assessed as income in those Federal Government support programs that do not include them.

Net financial investment and rental property losses will be added to income in all applicable tax and transfer programs (which include family assistance, the Higher Education Loan Program and particular tax offsets).

Education tax offset

Eligible Australian families will be able to claim a 50 per cent tax offset through their tax return every year for key education expenses (incurred from 1 July 2008) up to:

$750 for each child undertaking primary studies (maximum refundable tax offset of $375 per child, per year)

$1500 for each child undertaking secondary studies (maximum refundable tax offset of $750 per child, per year).

Families receiving Family Tax Benefit (Part A) with children undertaking primary or secondary studies, or living independently of their parents and receiving one of the following payments, will be eligible:

    * Youth Allowance
    * Disability Support Pension
    * Austudy
    * Veterans' Children Education Scheme
    * Student Financial Supplement Scheme
    * Scheme under section 258 of the Military Rehabilitation and Compensation Act 2004[/*]
Eligible expenses are for items that support a child during school and improve the quality of education. Examples include laptops, home computers and associated costs, home internet connection, printers, education software, trade tools for use at school, school text books and stationery. First home saver accounts

With improvements arising from an on-going consultative process, First Home Saver Accounts will provide a tax effective way to save for the purchase of a first home from 1 October 2008.

The Federal Government will now contribute 17 per cent on the first $5,000 of personal contributions annually, beginning 2008-09. Other key features will include:

    * 15 per cent tax on earnings, * tax free withdrawals when used to buy or build a first home, * an account balance cap of $75,000 (indexed), after which no additional personal contributions can be made, * a four-year rule for withdrawals calculated on a financial year  basis, * a 14 day cooling-off period, and * simplified product disclosure requirements.
The new contribution arrangements will provide increased benefits to all individuals earning up to $80,000 per annum.
In an example provided by the Federal Government, it is stated that a couple each earning average incomes who both put aside 10 per cent of their income into First Home Saver Accounts could save a deposit of more than $88,000 after five years.

Senior Australians tax offset

From 1 July 2008, senior Australians who are eligible for the Senior Australians tax offset will pay no tax on their annual income up to $28,867 for singles, and up to $24,680 for each member of a couple.

The Medicare levy low-income thresholds that apply to senior Australians will also be increased to ensure that they do not pay the Medicare levy until they begin to incur an income tax liability.

Low income earner tax offset

From 1 July 2008, the low income tax offset will increase from $750 to $1,200, but will continue to phase out once income exceeds $30,000. This means low-income earners will not pay tax until their annual income exceeds $14,000.

Child care tax rebate

From 1 July 2008, the rate of Child Care Tax Rebate (CCTR) will increase from 30 to 50 per cent of out-of-pocket expenses for approved child care and the cap will be increased from $4,354 to $7,500 (indexed) per child per year. Benefits will range between $500 and $2,486 per year for the average family.

From 1 July 2008, payments will also be made on a quarterly basis instead of annually, with families receiving the first quarterly payments from October 2008.

These changes complement commitments to establish up to 260 additional child care and early learning centres and establish rigorous new national quality standards.

Under existing arrangements, a 30 per cent child care tax rebate applies to out-of-pocket child care expenses for approved child care, up to $4,354 (indexed) per child per financial year. Out-of-pocket are the total fees paid for child care, less any child care benefit obtained. The rebate takes the form of a payment delivered through the Family Assistance Office.

Eligibility for the Baby Bonus

The Federal Government will limit the eligibility for the Baby Bonus to families with an adjusted taxable income of $75,000 or less in the 6 months after the birth of a baby (equivalent to an annual income of $150,000) from 1 January 2009.

From 1 January 2009, the Baby Bonus will be paid in 13 fortnightly instalments from the date of claim, rather than as a lump sum.

The amount of the Baby Bonus will be increased from $4,258 to $5,000 on 1 July 2008 and payments will be indexed by the Consumer Price Index each subsequent year on 1 July. Additionally, the Baby Bonus will be extended to families with newly adopted children aged from two years to 16 years, from 1 January 2009.

Eligibility for Family Tax Benefit Part B

The eligibility for Family Tax Benefit Part B will be limited to families where the primary earner has an adjusted taxable income of $150,000 a year or less. Adjusted taxable income includes taxable income, plus other amounts that reflect a person's financial means, such as net rental property losses and tax free pensions or benefits. The income test will be indexed annually by the Consumer Price Index.

Ceasing fortnightly payments for recipient who do not lodge tax returns

Where Family Tax Benefit recipients in a family have not lodged their tax returns for more than 12 months following the relevant entitlement year and have not responded to Centrelink notices asking them to do so, they will no longer be entitled to receive Family Tax Benefit through fortnightly instalments.

Medicare levy surcharge for private hospital cover

As expected, the Federal Treasurer announced an increase in the income threshold governing the Medicare levy surcharge.

From 1 July 2008, the additional 1 per cent surcharge will only apply to those without adequate private hospital insurance where income exceeds:

    * $100,000 for single persons (currently $50,000), and * $150,000 for couples (currently $100,000)
Labor has justified the move saying that the original target was high income earners, but the previous Government's decision not to adjust the thresholds had meant that more middle income earners had been caught by the measure. The move has been strongly criticised by the Australian Health Insurance Association, which predicts that a large number of members will not renew their insurance cover and will look to an over-burdened public hospital system for their health care. The Association has also foreshadowed increased premiums for those who remain privately insured.

Medicare levy low-income thresholds

From the 2007-08 income year, the Medicare levy low-income thresholds will be increased to $17,309 (from $16,740) for single people, and to $29,207 (from $28,247) for those who are members of a family. The additional amount of threshold for each dependent child or student will also be increased to $2,682 (from $2,594).

The Medicare levy low-income threshold for pensioners below pension age will also be increased. From 1 July 2007, the threshold will rise to $22,922 (from $21,637). This increase will ensure that pensioners below pension age do not pay the Medicare levy while they do not have an income tax liability.

Better targeting of the dependency tax offsets

From 1 July 2008, an income threshold will be applied to dependency tax offsets so that those earning more than $150,000 will not be entitled to claim the Dependent Spouse, Housekeeper, Child-Housekeeper, Invalid Relative and Parent/Parent-in-law tax offsets.

From 1 July 2009, the definition of income for these offsets will be aligned with that applying to family assistance payments. The new definition of income will be used for the claimant and the dependant.

Other measures

The Government will provide an income tax exemption for:

    * rent assistance paid to Austudy recipients, with effect from 1 July 2007, and

    * the Carer Adjustment Payment (CAP), with effect from 1 July 2007. The CAP provides financial assistance to families who have a child, aged up to six years, who has suffered a catastrophic event at some point after 1 January 2007.

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So if it comes into effect "From July 1 2009" does that mean that:

a) salary scarifced in the 08-09 financial year will be included as income if an assessment for support is made after July 1 2009; or

b) only salary sacrificed after July 1 2009 will be included as income for any future assessment?

That bit isn't quite clear to me.
My understanding is that CSA have often looked at salary sacrificing (when it suits them) to determine CSA.  Although we are currently objecting against the decision, CSA have stated that by drawing a lump sum from his pension pot, that my husband is 'salary sacrificing' against the pension he can draw and have awarded him an assessment against the maximum taxable pension he could have drawn.  Certainly I've heard of cases from another forum where CSA have added back in other examples of salary sacrificing (such as cars) etc.

If you look in the new CSA guide (from July), it does make reference to the fact that while people can legitimately reduce their gross income to reduce their tax bill through salary sacrificing, they can add back these amounts for the purpose of CSA calculations!

salary- sacrificed super

The Budget announcement states that salary sacrificed superannuation will be included in income from 1 July 09. The date of application of the new rule seems unclear.

Does this mean that it will be included in CSA assessments for the year 1 July 09 to 30 June 2010 based on income for the year ended 30 June 2009 or will it only be included in CSA assessments for the year 1 July 2010 to 30 June 2011 based on income for the year ended 30 June 2010?
Typical - salary sacrificing encouraged families to save money, or use it on items such as home ownership etc and now it's been pulled. I wonder if it will affect current salary sacrificing contracts which were arranged under the old system.

When you are swimming down a creek and an eel bites your cheek, that's a Moray.

Changes possible to salary sacrifice measures

The Government is looking at a range of changes to Salary sacrifice schemes which could well impact on Child Support calculations.
The Rudd government is to reconsider family assistance changes: due to take effect within two veeks following pressure from unions, charities and the federal Labor caucus to head off legislation that would force up taxes for 200,000 workers in the non-profit sector.
Possible changes to Salary Sacrifice

Executive Secretary - Shared Parenting Council of Australia
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I read in the papers yesterday that Nurses who specifically get Tax breaks in the form of salary sacrificing because of their low income + plus high skill level have disapeared under new tax system.

That's completely genius, I'm sure more nurse wont be fleeing the system.

It's great CSA and the government has decided that saving or salary sacrificing is not worth it, I'm sure it will make it easier for normal families to make ends met without FTB part B and increased levels of child support to pay and no incentive to save for retirement.


Han Solo routine "We're all fine here, thanks. How are you?" *weapons fire* "It was a boring conversation anyway!"
monster said
…no incentive to save for retirement
I have to agree good thing we have the baby bonus now as someone is going to have to pay for my aged pension.  I would have like to put more money into supper but, not to avoid CS but for my future. 
Has anyone actually looked into their retirement plan?

I haven't based on my age (early 20's) but I have an idea that I would like to live off $35000 a year as a single or $55000 a year as a couple. Yes I know that's quiet a mid to high amount but I would like to be completely self supporting. I've already proved to myself that we (me and de facto) can save $350 a fortnight on average wage.

I dont want to have to rely on the aged pension because by the time Im aged I can the goverment sticking old people into workhouses or charles dickens style elderly orphanages.

I honestly don't believe that there will a old age pension in about 50 years.


Han Solo routine "We're all fine here, thanks. How are you?" *weapons fire* "It was a boring conversation anyway!"

My super provider has a calculator on their website, I use it from time to time. I'm especially interested as having emigrated here 10 years ago and with only another 10 years or so until retirement what I can put into super earlier rather than later will have a major impact on super. I've been salary sacrificing since before my former marriage ended, with the intention of retiring comfortably and perhaps early, not likely now though.
The impact on me of CSA and family court has been I have no house. I have 5 years before retirement and I rent. My children are now teenagers and their costs are going up. I have majority care and receive no child support. I still have my super (and I have worked for 30 years in high paying jobs in ps)

I can't afford to stay in Australia and live, houses are too expensive, the laws too draconian, the whole 'vibe' is negative and discriminatory - based on fear and ignorance.

Fundamentally I am looking at other countries who will appreciate me and what little money i have left.

 Maybe I am not explaining myself well enough
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