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Changes to Tax legislation to report Salary Sacrifice Superannuation Deductions

 The legislation changes, that include the reporting of Salary sacrificed Superannuation deductions, amongst other things, have been announced (not assented to as yet I think).

This means that pre-tax salary sacrifice into superannuation, can be determined and is likely to be added to one's taxable income for child support calculation purposes. This I believe will apply for contributions made in the 2008-2009 tax year (see posts below as it looks as though it will apply to incomes from 1st July 2009).

Here's some snippets from the Tax Amendments announced :-

Tax Laws Amendment (2009 Measures) said
2  Subsection 6(1)
Insert:
rebate income of an individual for a year of income is the sum of:
   (a)   the individuals taxable income for the year of income; and
   (b)   the individuals reportable superannuation contributions for the year of income; and
   c)   the individuals total net investment loss for the year of income; and
   (d)   the individuals adjusted fringe benefits total for the year of income.

The wording of c) is for "total Net Investment losses", whilst up till now the CS legislation refers only to "net rental property losses".

Tax Laws Amendment(2009 Measures) said
Taxation Administration Act 1953
10  At the end of Subdivision 16 C in Schedule 1
Add:
16 182  Meaning of reportable employer superannuation contributions
   (1)   A persons reportable employer superannuation contributions for an income year is the sum of the amounts contributed by an employer of the person for the persons benefit, for the income year, to:
   (a)   a *superannuation fund; or
   (b)   an *RSA;
except to the extent to which:
   ©   the amounts are included in the persons assessable income for the income year; or
   (d)   the employer would have been liable to pay superannuation guarantee charge under the Superannuation Guarantee Charge Act 1992 in respect of the person and a quarter in the income year if the amounts had not been so contributed; or
   (e)   the contributions were required under the terms of an industrial agreement, in force under an *Australian law, that the person was not capable of influencing; or
   (f)   the sum of the contributions is less than or equal to any minimum amount that the employer is required to contribute for the persons benefit for the income year:
   (i)   under an *industrial instrument (other than an industrial agreement); or
   (ii)   in relation to a *defined benefit interest of the person.
Influencing the terms of an agreement
   (2)   For the purposes of paragraph (1)(e), the person is taken to be capable of influencing the terms of the agreement if:
   (a)   the person is the only employee covered by the agreement; or
   (b)   the employer employed the person at the time:
   (i)   the agreement commenced; or
   (ii)   a variation of the agreement commenced;
      and they were not at *arms length at that time (even if they were at arms length at other times).
   (3)   For the purposes of paragraph (1)(e), a rebuttable presumption arises that the person is capable of influencing the terms of the agreement if it is established that:
   (a)   the employer employed the person at the time:
   (i)   the agreement commenced; or
   (ii)   if the agreement has been variedthe most recent variation commenced; and
   (b)   the agreement covered at most 20 employees of the employer at the time applying under paragraph (a).
Employer and employee
   (4)   For the purposes of this section, employer and employee have the expanded meanings given by section 12 of the Superannuation Guarantee (Administration) Act 1992 (assuming that subsection 12(11) of that Act had not been enacted).
If the person dies
   (5)   For the purposes of this section, disregard whether any *superannuation benefits arising from a contribution are payable to a *SIS dependant of the person if the person dies before or after becoming entitled to receive the benefits.

I've attached the amendments Bill, although I've only scanned through them very quickly.

Attachment

Last edit: by MikeT

Looking further I've found the Child Support changes they are :-

Tax Laws Amendments (2009 Measures) said
Child Support (Assessment) Act 1989
32  Subsection 5(1) (definition of net rental property loss)
Repeal the definition.
33  Paragraph 43(1)(d)
Repeal the paragraph, substitute:
   (d)   the parents total net investment loss (within the meaning of the Income Tax Assessment Act 1997) for that year of income;
34  At the end of subsection 43(1)
Add:
   ; (f)   the parents reportable superannuation contributions (within the meaning of the Income Tax Assessment Act 1997) for that year of income.

These changes are in the same document attached to the first post in this topic.

Net rental property losses are being changed to net investment losses.
Here's a PDF version of the Bill.



Attachment
This may be relevant as it implies that the changes will only affect income from 1st July 2009.

Tax Laws Amendment (Budget Measures No. 1) Bill 2009: Reforms to income tests said
Part 5Application
86  Application
The amendments made by this Schedule apply in relation to income years starting on or after 1 July 2009.
Looks like nearly time to sell the shares and salary package a prestige car and pay an employee contribution to avoid any FBT liability.

salary sacrifice

My understanding was that salary sacrificed amounts into super funds would not be added back on to income for CS purposes unless the fund was non-complying. Can anyone confirm this?

If amounts are added back on even for complying funds that will ruin the chance for many divorced parents to repair their future security, after losing all their assets through marital breakdown etc.

Also the CSA website says the changes start 1/7/09 but the Bill suggests the changes only apply to income received from 1/7/09 onwards, so it couldn't happen until at least 1/7/10. Clarification anyone?
Sunnyside, I've not seen anything that suggests that it is only for non-complying funds. I believe that it will be for all funds as this is a measure by the Government to clawback more FTB by the way of increasing CS incomes (and also reducing FTB payments by increasing incomes in general), although in some situations CS payments may reduce if the receiving parent is making the additional super contributions.


As for timing the changes will be in effect as from 1/07/2009 that then only allows the reportable amount to be included on payment summaries for that 2009-2010 financial year and thus there will be no reportable superannuation until the tax returns for that financial year. Thus it will be from July 2010 that assessments will include super, but super for the 2009-2010 financial year.

Well that's how I understand it.

CS Bill

Thanks MikeT

My idea that it only applied to non-complying funds actually came from the CSA solicitor's hotline (to which I was eventually transferred when I rang the agency to ask when and how - as in under what legislation - they were able to justify adding these amounts back on). Seems the legal people over at CSA don't even understand what is planned. Excellent.

Does anyone know where the bill is up to in terms of becoming law? And what the chances are that it will get through in current form? I think it stinks. Forget giving up on ever buying a(nother) house, I'd say there will be plenty of people now looking at giving up on ever retiring.
With regard to the status of this bill, I've found this on Parlinfo :-

Parlinfo said
Type     
Government
Originating house    
Reps
Status    
Before Reps

Summary

Progress of bill
House of Representatives
Introduced and read a first time    12/02/09    MS-Word PDF HTML
Second reading moved    12/02/09    
           
Senate
Referred to Committee    12/02/09    Committee Name: Senate Economics Committee
Report Due: 10/03/2009

Here's a link Parlinfo

Note I'm not at all experienced in following bills and things around but it looks as though the report for the senate was due today.

Senate economics committee report

Here's a link to the report published yesterday. The committee is recommending the bill be passed. I think it has yet to be voted on by either house.

ERROR: A link was posted here (url) but it appears to be a broken link.
http://www.aph.gov.au/senate/committee/economics_ctte/tlab_1_09/report/report.pdf
Great stuff Sunnyside, thanks for finding that, just for the curious here's it as a download from your ever friendly FLWG. :)



Attachment
On equity grounds this is very hard to argue against. All it means though is post 2008/09 money will move elsewhere to dodge the impact, or the smat ones will declare losses in different areas of the ITR.

Changes to legislation related to 'salary sacrificed' superannuation

Changes to legislation related to 'salary sacrificed' superannuation

Under changes to the child support legislation, certain 'salary sacrificed' superannuation amounts will be included in a parent's annual income for the purposes of child support from 1 July 2009 (i.e. for 2009-10 and later financial years). This will affect both paying and receiving parents equally.

The changes will generally affect child support assessments for child support periods that begin on or after 1 July 2010. This is because a parent's income for the 2009-2010 financial year will usually only be used in the child support period that starts after 1 July 2010.

Estimates of income and Change of Assessment applications require parents to provide their current income, rather than their income for the previous financial year. For this reason, and under the new legislation, estimates and Change of Assessment applications made by parents after 1 July 2009 will need to include amounts the parent has elected to 'salary sacrifice' to superannuation, as well as the amount of any deductible personal superannuation contributions made.   

Compulsory super payments, such as amounts required to be made under superannuation guarantee law or pursuant to an industrial award or agreement, would not be considered part of a parent's child support income the changes would only capture amounts that an individual has elected to have contributed to superannuation.  The changes will mean, for means test purposes, 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.

The CSA has always had the ability to consider voluntary super contributions for the purposes of determining a parent's total income and financial resources through the Change of Assessment process.  The new measure will allow the CSA to include the particular 'salary sacrificed' superannuation contributions (to be reported on employee annual and part-year payment summaries from 1 July 2009), as part of a customer's child support income, enabling more accurate assessments based on a parent's total salary package for the benefit of their children.

The CSA recognises that there are a number of reasons why parents choose to salary sacrifice into superannuation. Under the changes, parents would still be able to enjoy the tax benefits of salary sacrificing while ensuring their children receive the right amount of financial support according to both parents' circumstances.

The CSA will ensure further information relating to the changes is made available to parents.

It is important that parents consider their choices on salary sacrificed superannuation plans before or during the 2009-2010 financial year. Customers that are currently salary sacrificing may wish to seek financial advice on how the legislation may affect their income for the purposes of child support. For a list of financial advisors, go to the Community Service Directory at www.csa.gov.au

Financial counselling services and referral information is also available on the Department of Families, Housing, Communities and Indigenous Affairs website, the Centrelink website and the Australian Government's Understanding Money website at www.understandingmoney.gov.au.




The Child Support Agency (CSA) has provided this general information to support a better understanding of the Child Support Scheme. To discuss an individual child support case, or for further information, please contact the CSA directly, as specific cases or circumstances will not be discussed in a public forum.
All CSA communications with the forum will be in the form of public posts- the CSA will not be responding to private posts or emails.
Additional information on the Child Support Agency, and details on their participation in this site can be found here
Did I really read this bit "…or pursuant to an industrial award or agreement, would not be considered part of a parent's child support income…"?

That position is not authorised by the Bill that the Parliament has passed and will create inequitable situations.  How about the scenario where payer is subject to an industrial agreement that says they must belong to super fund to be employed there and sacrifice is offered while payee has same agreement and no sacrifice available.  If both contribute at 10%, that is a hell of a difference.  Thoughts?  
BigRed,
          perhaps I'm wrong but from what I can see, the taxation law, as per the starting post, does cover this as non-voluntary contributions (my term) are employer reportable as opposed to employee reportable. Without going through all the changes my guess is that somewhere it will say that both amounts have to be specified on the group certificate.

I think in simple terms it's saying if a contribution to super is mandatory then it cannot be touched, or from the other point of view if a contribution is voluntarily made then it's will be grabbed. At least it will be applied relatively fairly instead of it being a decision that in the past would very likely only have been applied to the payer.

I have been made aware of one recent example where a transfer of around $200,000 into super from an investment, by a recipient was considered reasonable by the SCO.
MikeT we are discussing different things here.  I am talking about a comparison of 2 punters deductions from their ongoing pay.  Both have an award, agreement or whatever that says "you must be in the super fund to work here" but one has salary sacrifice which reduces their taxable while the other doesn't.  Under this policy position, the salary sacrifice amount will NOT be added in while the post tax punter will.  Outcome could be an artificial comparison.  What annoys me is that it is not what the legislation says, ie yet again the CSA Guide is unlawful.
I think I understand now BigRed, the guide appears to allow post-tax contributions which would result in the taxable income being increased to compensate for the tax reduction that only pre-tax contributions offer thus such an adjustment would be unfair. How if the guide said something like :-

Prehaps the CSA Guide should of said
Changes to legislation related to 'pre-tax salary sacrificed' superannuation

Under changes to the child support legislation, certain 'pre-tax salary sacrificed' superannuation amounts will be included in a parent's annual income for the purposes of child support from 1 July 2009 (i.e. for 2009-10 and later financial years). This will affect both paying and receiving parents equally.

The changes will generally affect child support assessments for child support periods that begin on or after 1 July 2010. This is because a parent's income for the 2009-2010 financial year will usually only be used in the child support period that starts after 1 July 2010.

Estimates of income and Change of Assessment applications require parents to provide their current income, rather than their income for the previous financial year. For this reason, and under the new legislation, estimates and Change of Assessment applications made by parents after 1 July 2009 will need to include amounts the parent has elected to 'pre-tax salary sacrifice' to superannuation, as well as the amount of any deductible personal superannuation contributions made.   

Compulsory super payments, such as amounts required to be made under superannuation guarantee law or pursuant to an industrial award or agreement, would not be considered part of a parent's child support income the changes would only capture amounts that an individual has elected to have contributed as pre-tax superannuation.  The changes will mean, for means test purposes, individuals who have access to pre-tax salary sacrifice to reduce their taxable income will be treated on an equivalent basis to those who do not have access to pre-tax salary sacrifice arrangements.

The CSA has always had the ability to consider voluntary super contributions for the purposes of determining a parent's total income and financial resources through the Change of Assessment process.  The new measure will allow the CSA to include the particular 'pre-tax salary sacrificed' superannuation contributions (to be reported on employee annual and part-year payment summaries from 1 July 2009), as part of a customer's child support income, enabling more accurate assessments based on a parent's total salary package for the benefit of their children.

The CSA recognises that there are a number of reasons why parents choose to pre-tax salary sacrifice into superannuation. Under the changes, parents would still be able to enjoy the tax benefits of salary sacrificing while ensuring their children receive the right amount of financial support according to both parents' circumstances.

The CSA will ensure further information relating to the changes is made available to parents.

It is important that parents consider their choices on salary sacrificed superannuation plans before or during the 2009-2010 financial year. Customers that are currently salary sacrificing may wish to seek financial advice on how the legislation may affect their income for the purposes of child support. For a list of financial advisors, go to the Community Service Directory at www.csa.gov.au

Financial counselling services and referral information is also available on the Department of Families, Housing, Communities and Indigenous Affairs website, the Centrelink website and the Australian Government's Understanding Money website at www.understandingmoney.gov.au.
I do have a question, what happens when you invest in one of these 100% tax free investments.  How does C$A look at them are they added back to your income for CS. 
My guess about 100% tax-free investments (I know nothing about these), is that the money put into the investment is taxed. So the contribution itself wouldn't affect CS. However I guess that the amount invested could be considered under a reason 8 change of assessment (a parents income, property, financial resources, or earning capacity). I guess this covers it :-

extract from CSA Guide 2.6.14 said
However, there is a range of circumstances that may form the basis of an application under this reason. It may be that a parent:

    * has substantial property but a small child support income amount;
    * has legitimately arranged their financial affairs to minimise tax;
    * receives income which is not assessable or is exempt from tax; or
    * received a lump sum payment that is not included in the child support income amount.

Link to 2.6.14 of the CSA Guide
Mike T re the Guide, that is exactly what it should say.  The more I learn about this stuff the more and more horrified I become.  There is almost no such thing as a level playing field in CSA land.  As a sociaty we have taken a simple concept and badly built a layer of rules around it so that at best it is opaque.

Re Newguys question, I would hazard to suggest that it may be assesable on withdrawal - growth component only.   
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