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Salary Sacrificed Super New Reporting

Changes to income for the 2010 income year mean there are new reporting requirements for Super. Salary sacrifice super will now be shown on earnings cetificates and as such become available to CSA.

Just received a letter from the ATO (at work I'm the Accountant) saying that for 2010 income year ie July 09 to June 10 there are new reporting requirements for Super. In effect it means that for those who salary sacrifice this amount will now be shown on earnings cetificates and as such become available to CSA.

Whilst salary sacrifice has always been counted as part of accessed income in reality unless the ex knows about it then its often not counted. So from next year a few ex's will be getting a windfall as CSR increases the support amount based on higher disclosed income. This will then no doubt result in many ex's asking for a revision of prevoius years.

Salary Sacrificed Super and financial Investment changes

We published news about this in May so if you checkout the news section under Child Support and Press Releases you will see some more detail. I have published links below that will assist and have compiled some further information from discussions with the CSA recently. I think you will find the information here fairly complete.

Changes to the definition of income
From 1 July 2009, the Australian Government will be introducing changes to the definition of income. This will affect the types of income that are used in your child support assessment and the income tests for a range of other government benefits and payments.

The changes to the definition of income mean that, from 1 July 2009, your adjusted taxable income will also include the following components before your child support income is worked out:
Reportable superannuation contributions  salary sacrificed superannuation or other contributions your employer makes to a super fund on your behalf (that are above the compulsory contributions your employer must make), along with any personal deductible contributions you make to a super fund for which you claim an income tax deduction on your individual tax return, and also Total net investment losses  from rental property and financial investment income, including shares, managed investment and forestry managed investment schemes.

If your child support assessment is based on your taxable income, your new adjusted taxable income wont affect your child support assessment until 1 July 2010.

If your child support assessment is based on an estimate of your income or you are going through a Change of Assessment process after 1 July 2009, you will need to include any salary sacrificed superannuation amounts, as well as any deductible personal superannuation contribution amounts made and any net investment losses, to avoid the risk of having outstanding child support later.

For more information about the changes to the definition of income and their effect on your child support assessment visit the CSA website, call 131 272 or visit a Regional Service Centre or CSA office in your area.
Important:

From 1 July 2009, these changes will also affect what Centrelink defines as income and therefore some Centrelink payments. It is important to remember that what Centrelink defines as assessable income is not always the same as what the Australian Taxation Office defines as taxable income.

For more information, visit the Centrelink and ATO websites.
SALARY SACRIFICED SUPER/FINANCIAL INVESTMENT CHANGES

Key messages
 
The definition of income used to calculate child support assessments will be expanded from 1 July this year, affecting some separated parents. (See our news release at: The Family Law Web Guide news area under Child Support and here in the press release area

This will mean that salary-sacrificed superannuation contributions and net losses from financial investments will now be automatically added to a parents adjusted taxable income for child support purposes, ensuring more accurate assessments for parents.

CSA say It is important that parents consider their choices on salary sacrificed superannuation plans and negative gearing activities involving financial investments before or during the 2009-2010 financial year.

Background

  • The changes will affect both paying and receiving parents equally.

  • Compulsory super payments, such as employer contributions, will NOT be considered part of a parents child support income. The changes will only apply to voluntarily sacrificed payments.

  • Separated parents on a wage or salary can continue to enjoy the tax benefits of salary sacrificing their superannuation.

  • Similarly, all parents can continue to enjoy the tax benefits of negatively gearing into financial investments such as shares and managed funds.

  • However the CSA will be required by law to add back these amounts to income to establish a more accurate child support assessment as of 1 July 2009.

  • The changes will mean that parents who have salary sacrificed into super to reduce their taxable income will be assessed on an equivalent basis to those who do not have access to salary sacrifice arrangements.

  • The changes will generally affect child support assessments for child support periods that begin on or after 1 July 2010. This is because a parents 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 made by parents after 1 July 2009 however, 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, including financial losses. This is because Estimates of income and Change of Assessment applications require parents to provide their current income, rather than their income for the previous financial year.

  • The CSA has always had the ability to consider voluntary super contributions for the purposes of determining a parents total income and financial resources through the Change of Assessment process.  The new measure will require the CSA to include the particular salary sacrificed superannuation contributions as part of a customer's child support income. This will enable more accurate assessments based on a parents total salary package for the benefit of their children.

  • Salary sacrificed contributions will be reported on employee annual and part-year payment summaries from 1 July 2009.

  • The CSA say that they recognise 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.

  • CSA advise that customers that are currently salary sacrificing into superannuation 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 counsellors, go to the Community Service Directory at www.csa.gov.au

  • Individuals may salary sacrifice into a range of other benefits and these individuals would not be affected for child support purposes.
Secretary Spca said
None of these notes discuss the other components that are considered as 'income' for child support such as reportable fringe benefits, target foreign income and tax free pensions/benefits. The CSA Guide should be consulted.
Attachment
The existing rules

 

Executive Secretary - Shared Parenting Council of Australia
 Was my post helpful? If so, please let others know about the FamilyLawWebGuide whenever you see the opportunity
 
dad58 said
Whilst salary sacrifice has always been counted as part of accessed income in reality unless the ex knows about it then its often not counted. So from next year a few ex's will be getting a windfall as CSR increases the support amount based on higher disclosed income. This will then no doubt result in many ex's asking for a revision of previous years.
See my post today on the time frames
In relation to the 'time allowance', the CSA can only make a determination through the COA process for assessment periods up to 18 months prior to the date upon which a customer lodges his or her COA application. If a customer wants CSA to consider changing the assessment for a period more than 18 months prior to his or her application, they can apply to a court under section 111 for leave. I am not sure if this means a department initiated review or not.

A court may grant leave for the CSA to make a COA for up to seven years prior to the day on which the customer applied to the court for leave. A court may alternatively grant leave and make an order itself to change the assessment for up to seven years prior. Only a court can order this.
Also
If a CSA customer wishes to apply for the other customer's salary sacrificed components to be included in a child support assessment prior to 1 July 2009, they will need to do so through the Change of Assessment (COA) process. The Child Support Agency (CSA) has always had the ability to consider salary sacrifice arrangements through the COA process when determining a customer's income and financial resources. The changes from 1 July 2009 allow the CSA to include salary sacrificed superannuation contributions as part of a customer's child support income, without the need to apply through the COA process.
 
It should be noted that a CSA customer's COA application will not necessarily be successful simply because they have become aware that the other customer may have salary sacrificed a portion of their income in previous years. Many Payees have never been aware in the past of other income types and have relied on tax returns or other evidence, however the rules are changing to show these sorts of packages on the employee earnings declaration form and thus any "below the line" earnings are now declarable for purposes of CSA earnings (Tax deductibility / Income tax is different).  You will see the ATI (Adjusted Taxable Income) if you mouse over the ? on the results pages of the calculators.

As with any other COA decision, if one of the reasons is established, the CSA must also consider whether changing the assessment would be 'just and equitable' and 'otherwise proper'. We have our own views about the whole COA process which is currently under review and there are forums here that are collating ideas to put forward. Feel free to contribute to those. Your financial taxation advisor / accountant will know all of this and much more.


Executive Secretary - Shared Parenting Council of Australia
 Was my post helpful? If so, please let others know about the FamilyLawWebGuide whenever you see the opportunity
 
These amendmets are pretty basic really and only deal with the obvious.  I would imagine someone with some financial acumen would be able to neatly and legitmately sidestep the rules if they were so inclined.  I have already identified a number of ways  of working one's way around these new laws and somewhat reducing child support assessments whic I am moving to put in place for future mitigation purposes.   
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