Warning- Family Tax Benefit

[Brenda Irwin]

I am posting this to warn others of how the Family Assistance Office calculates you income.

In a normal tax system your rental income is offset by your expenses and it may appear as a negative figure or a loss which you then offset against any wages income.

The FTA does NOT recognise a negative figure and the entire figure is ADDED ON to your income. They also do not recognise a 'Taxable income' figure.

For the struggling families with rental properties which may be negatively geared, "you will not get any sympathy from the FTA".

I have been issued with a "pay it back" notice for the last 12mths of FTA even tho I have NO wages income (only negative losses) and have 2 children and a husband who does have wages of $56,791 GROSS.

Cheers Brenda:mad:

[TheBacon]

I sincerely hope this is not correct!!!

Surely your income MUST be calculated as income minus expenses!!! Otherwise tradesmen etc., would have potentially VERY LARGE aparent income if costs of producing income were not included??

Surley the worst outcome must be that one cannot write off losses in one area against gains in another area ???

Can anyone else comment on this?

TheBacon

[Mark_B]

FYI:

http://www.ato.gov.au/businesses/content.asp?doc=/content/10712.htm

I had a look on the Deparment of Family and Community Services website as well, but the FTB links didn't work for me.

http://www.facs.gov.au

MB

[duncan_m]

Originally posted by TheBacon

Can anyone else comment on this?

TheBacon

I can confirm it.. its quite clear.. rental property losses are added back to your taxable income to reach your 'amended assessable income'.. which is used for Family Tax purposes to calc your allowances.. a careful read of the information shows that its not watertight depending on how you hold your properties.. Brenda, given the significant nature of your holdings and the businesslike manner in which you conduct it you should seriously consider forming a partnership with Mr Brenda as this would neatly circumvent the issue for you and give you full access sto FTB A and B...

[abcdiamond]

Brenda

Are you using the FTB calculator on the ATO web site ?

If so put a "-" minus sign before your Rental loss. They haven't set it up properly.

Let me know how you get on. I have a Centrelink contact if needed.

ABCD

[Kevin]

This is a section I copied off the
FBT section on the link Pitt_St listed These are the sections you have to fill in to asess return.



Taxable income

Reportable fringe benefits

Net rental property losses

Tax-free pensions or benefits

Target foreign income

Child maintenance expenditure

[abcdiamond]

This is an example with some figures entered, note the big (not real) rental loss.... :)

Family adjusted taxable income (ATI) – for this status period

. . . . . . . . . . . . . . . . . . . . . . . . . . . . .You . . . . Your spouse

Taxable income . . . . . . . . . . . . . . . . . $0 . . . . . . $56791
Adjusted fringe benefits . . . . . . . . . . $0 . . . . . . $0
Net rental property losses . . . . . . . . . . $-20000 . . $0
Tax-free pensions or benefits . . . . . . . $0 . . . . . . . $0
Target foreign income . . . . . . . . . . . . . $0 . . . . . . $0
Deductible child maintenance expenditure $0 . . . . . $0
__________________________________________________

Total for you and spouse . . . . . . $-20000 . . . . . . . $56791
__________________________________________________

Total ATI for family $36791


FTB Benefit results are:
Part A benefit $1,507.75
Part B benefit $1,978.30

Combined benefit for the year $3,486.05

[Aceyducey]

This is another area where holding property in a Trust is an advantage as you insulate the 'income' from negative gearing.

Though I appreciate this doesn't really help anyone who currently owns property in their own name :(

Cheers,

Aceyducey

[Brenda Irwin]

Abcdiamond on the chart you have there, that is not how the FTO sees it.

Eg: ........................................Myself...................Spouse
Taxable income.................. $0 .................. $56,791
Losses from ips.............. $20,000................ .$20,000
Carried forward losses... $27,000.....................$0....
(from prev years)
-----------------------------------------------
$47,000..................$76,701

As you can see, not only this years losses are ADDED in but also my losses carried forward for the past 5yrs.

The dictionary classes 'losses' as exactly that, 'losses' but not according to our FTO:confused:

[abcdiamond]

Brenda

Are those figures provided directly from the FTO, or are you using internet software to input the data, and getting the results via that ?

I am sure you can get that rectified, as it seems like a very obvious error on their part.

I got the same result when I entered the data on the ATO FTB web site area, until I realised you had to use a minus sign to enter a loss.

Maybe there own system is the same, and they have a new person inputting the data (incorrectly)

ABCD

[Brenda Irwin]

abcdiamond, the FTO has actually contacted me and said our family income is $102,414.00 and have given us until the 13/11/2003 to repay the $2420.90 they have paid to us over the past year.

I did ring them up and they explained that all our negative income becomes positive income.

[abcdiamond]

Its ***** ridiculous..

The Family Tax Office Web Site (http://www.familyassist.gov.au/Internet/FAO/FAO1.nsf/Income/whatis.html#002) does quote:
For adjusted taxable income purposes, a net rental property loss is added back to your taxable income.
It doesn't make much sense, I am getting it checked tomorrow, to at least find out why.

ABCD

[abcdiamond]

Does this explanation help:

Gross Income $ 50,000
Property Loss $ 8,000
Net Taxable Income $42,000

However the FTO add back the
Property loss of $8,000 to the
Net Taxable Income of $42,000

To get back to the Real Income of $50,000

The idea is that the FTO get back to the real Gross income, but in Brenda's case it has somehow gone much further than that, and increased the Husbands Gross Income, without the loss being allowed in the first place, as it isn't his Loss.

If Brenda's husband could split his income with her, then it would solve it, or if Brenda could pass the loss to her Husband somehow.

[bundy1964]

Hi Brenda

Why not have a talk to this guy?

Electoral Division of Lilley (Qld)

Mr Wayne Swan MP
Party: Australian Labor Party

Parliament House Contact
House of Representatives
Parliament House
Canberra ACT 2600
Tel: (02) 6277 4925
Fax: (02) 6277 8498

Email: Wayne.Swan.MP@aph.gov.au

Electorate Office Contact
Nundah Office:
Location:
1162 Sandgate Road
Nundah Qld 4012

Postal Address:
PO Box 182
Nundah Qld 4012

Tel: (07) 3266 8244
Fax: (07) 3266 4263

I am sure being shadow minister he could help straighten things out.

bundy

[duncan_m]

Originally posted by bundy1964
Hi Brenda

Why not have a talk to this guy?



Why bother? :-) There's ways around it, move on people..

Duncan.

[Robyne]

Hi Brenda,

I went through this last year although my property losses were offset against some income. It really doesn't seem logical. It is the same for Child Care Benefit. It doesn't help that the Centre Link staff (at least the ones I had to speak to) had very little understanding of what they were talking about.

I sympathise with your frustration.

Robyne

[Mrs Bird]

Hi Brenda,

We also have IPs and receive the family payment.

It is paid to us as a lump sum, calculated by the FAO when our tax return is lodged by our accountant. This way I dont have to pay anything back and it is up to the FAO to decide how much I get.


It was my understanding after filling out those awful 20 page forms( a few years ago) that the FAO wanted to know about IPs but would not take into account of any loss or income incurred by IPs.

I remember reading one of your posts that you were selling a property? so any gain you made would of course be part of your assessable income...just a thought?

IMHO Duncan M was right in saying that it is all in the structure of your finances.

This is something you dont need just before Christmas but make sure you inform the tax office to stop payments as from now so you dont have another bill next financial year...if you qualify then you will be backed paid

Mrs Bird

[TheBacon]

I will be contacting my accountant to clear this up. I have not yet lodged a claim but will soon. I sure would NOT want to pay anything back at end of year.

TheBacon

[geoffw]

Um, I seem to be in a big minority here.

You've got lots of property which make a big cashflow.

And you've got lots of capital growth.

Did I miss something?

Your net worth has increased very significantly- and your income has increased as well.

If that means paying back the government because you estimated a year ago that your income would be lower (because you did not estimate that you would do so well) then in your position I would not be unhappy to pay back the extra.

In the end, you are still FAR better off.

[dwyerfam]

And there's even more bad news!

If you receive FAO Payments for your teenager(s) and they work a bit of part time during the financial year, watch how much they earn. I don't have the correct figs at my fingertips, but if the teenager (or full-time student who is a dependant on you) earns more then approx $8,400 p.a. (check this amt), then you lose all FAO entitlements for the whole year going back to July onwards. Yes, they go back to July!

How does one know how much your teenager(s) will be earning in a financial year? This rule stinks in having to your lose entitlement back to July when we don't know what they will be earning. It should only apply when they reach that amount, then you can lose entitlements, but not back to the being of the financial year! Bummer.

Re FAO payments, you can give up your Centrelink/FAO payments each f/n and claim it on your tax return at end of each F.Y. Nice bonus if you can manage (get use to it?) without the f/n payments.

One of my goals is to do away with any FAO payments. I will know that my wealth is going up when I lose entitlements to FAO. Yippee.

Danny D.

[abcdiamond]

Hi Geoffw

In principle I agree with what you say, I think that for a lot of people these extra benefits are often not really needed, and the original idea was for them to be available for the needy.

However, being a person who likes to see fair play, I can't help but get involved here. Also, with Centrelink seeming to not know what they are doing, I feel like pushing them to get an explanation, as to why it works in the way it does.

I have just been told that if a person has zero "taxable" income, and does not need to lodge a tax return, then they become a "Non-Lodger" and can get around the problem, as the Rental Loss then does not get added back anywhere.
eg: in Brendas case, if she did not lodge a tax return the family income would be $56,791 (or less), instead of the $102,414 quoted.

I am confused how this works, and so is Centrelink, and when they get confused it seems like they prefer to pass the buck.

I've just remembered why I don't like dealing with government departments. "****** red tape"
:)

[Mark_B]

Originally posted by bundy1964
Why not have a talk to this guy?

Electoral Division of Lilley (Qld)

Mr Wayne Swan MP
Party: Australian Labor Party

I am sure being shadow minister he could help straighten things out.



While I believe it is nice to go through your local member (if indeed he is your local member), writing to Wayne Swan is likely to do as much good as writing to Santa.

Despite what the bureacracy would like the public to believe to the contrary, today's Commonwealth public service is highly politicised.

A letter from a Shadow Minister (or any non-Govt MP) will get a reply, but it will be slow.

Further, as the letter has come from someone outside of the Government (the coalition) the detail provided will typically be less than if the letter came from a coalition member.

If you want to get action, my advice would be to write to the Minister concerned.

Having said that - as unfair as it may seem - if the Department has made a call and they are within the rules then, IMHO, you have a little chance of getting it overturned.

The greatest benefit to be gained from writing to the Department is that they *may* give you additional time to pay the money owing.

MB

[brains]

Im with Geoff here. You own 22 houses and have done well over the last couple of years like most of us on here, I think its fair that the government want their money back.

My wife has a friend friend who, with her husband, earn just enough and no more so they can recieve max government benefits. I totally dislike this attitude, my idea is to earn so much that you can forget about government payments forever.


I thought this line was funny:

"For the struggling families with rental properties which may be negatively geared, "you will not get any sympathy from the FTA".

I always thought struggling families were wondering where their next dollar is coming from.

[HowDo]

Duncan
How do you get around the problem by forming a partnership?

[Rixter]

Hi,

I have taken this up with them before.

The reason they have quoted me for adding property losses back on for the purpose of working out the Family Benifits is , and I quote -

"To stop people double dipping on the federal funded breaks"

Thsi is due to investors already having received Income Tax breaks from their property loss deductions. If they paid Family allowances on top of those rebates , it would be double dipping into the federal govt kitty.

It is a rude shock to first time investors who are easily caught out with not knowing how they calculate it all - One govt dept (ATO) calculates Taxable Income one way, and another dept (FAO) calculates Income another way :mad:

[duncan_m]

Originally posted by HowDo
Duncan
How do you get around the problem by forming a partnership?

HowDo,

Read the thread titled "Tax Question" that is active at the moment.. Provided your activities amount to the "carrying on of a business" then your net rental property loss could be incurrred within a partnership of you and your spouse and this amount is specifically NOT added back on by FAO.. quoting http://www.familyassist.gov.au/Internet/FAO/FAO1.nsf/Income/whatis.html#002


"Net rental property loss

A net rental property loss is a loss incurred on a rental property that you declare on your personal income tax return for the financial year. For adjusted taxable income purposes, a net rental property loss is added back to your taxable income."It does not include a net loss from property that is part of a partnership (as recognised by the tax office), trust or company.

[Brenda Irwin]

Have decided to cancel anything to do with any FTO assistance, pay the $2,420 back ASAP.

Duncan, yes I have nearly 22 ip's but 15 were purchased in the last financial year due to the previous 5 ips being revalued and extra equity found.

This extra equity however did not extend totally to cover solicitors fees, stamp duty, loan costs, or renovation costs.

Also because half were bought just prior to the end of the financial year, the rental incomes did not cover the full years insurance costs, nor the council rates of which half of them were half yearly ones, not quarterly.

It's all cash up front to start with when the bills come in and not too many trademen would wait a few months for a few rents to come in so I can pay them.

Should be making some cash income sometime in the new year tho:)

[SANDY]

This was probably one of those too hard questions so they have adopted a blanket approach - it appears that it is more of a link to cashflows (ie real $ income) rather than expenses. If you have a loss from property it must be generated by non cashflow expenses ie depreciation, so to have all claimants on a level playing field they add the loss back to the assumed cash position before the loss. Unfortunately the system fails if all or most of your loss is generated by pure cashflow outgoings with no non cash expenses included.
Only a thought but who knows what the real intent is meant to be.

[abcdiamond]

The ATI income figures according to Centrelink:
They take account of future income, to offset against current losses, to caculate current income, for FBT purposes.
But it all works out OK in the end, assuming your future years do produce profits.

................ Gross Income......... Rental Loss.............. Revised ATI Annual Income
Year 1...... $ 1,000.00 ............. $4,000.00 .............. $4,000.00
Year 2...... $ 5,000.00 ............. $3,000.00 .............. $3,000.00
Year 3...... $ 5,000.00 ............. $2,000.00 .............. $4,000.00
Year 4...... $ 5,000.00 ............. $1,000.00 .............. $5,000.00
Year 5...... $ 5,000.00 ............. $ 0000.00 .............. $5,000.00
Year 6...... $ 6,000.00 ............. $ 0000.00 .............. $6,000.00
Totals....... $27,000.00 ......................................... $27,000.00

And there I was, hoping to prove them wrong.... :mad:

[chrislaw]

About 4 years back I registered for the dole, I had bought shares with a 10k loan alittle before that and they had halved in value.

When I was filling in the dole forms with them, they put the 5k in shares as assets but not the loan in liabilities.

I asked why and they said they didn't care about the loan, as far as they were concerned I had 5k in shares. Like Brenda I couldn't believe it, I said I can prove the loss but they weren't interested at all and my dole was reduced (only slightly) because of it.

I can see from this post that maybe it was to stop this double-dipping but at the time I was dumbfounded.

Chris

[geoffw]

The whole system of being able to claim money from the government, and then having them able to reassess- even up to many years later- is seriously flawed.

The intentions were quite honourable. They want the people who are financially hurt to be able to get the benefits up front.

But the consequences of misGuestimating your anticpiated income are severe.

Whatever people may morally thing of Brenda's claiming of benefits (and it does seem that even morally she may have had the right to receive), the fact that she can be given that amount of money by the government, and then for that same government to claim the entire amount back is COMPLETELY immoral.

There have been the stories of pensioners who may have to sell their homes because the government has accidentally overpaid them.


I don't know if those stories are true. But the present governement appears to me to be a government without heart.

(the alternative government though also appears to me to not only be a disincentive to investment, but also actively against negative gearing, as a "tax break for the rich")

[brains]

Geoff,

Maybe you could contact A Current Affair for a story. The heading could be:

'Heartless government demands $2400 from QLD woman that owns 22 houses....shame' :D

[sbe]

That's great ABC, but when I make money, they add that too. Add that table out further.....
................ Gross Income......... Rental Loss.............. Revised ATI Annual Income
Year 1...... $ 1,000.00 ............. $4,000.00 .............. $4,000.00
Year 2...... $ 5,000.00 ............. $3,000.00 .............. $3,000.00
Year 3...... $ 5,000.00 ............. $2,000.00 .............. $4,000.00
Year 4...... $ 5,000.00 ............. $1,000.00 .............. $5,000.00
Year 5...... $ 5,000.00 ............. $ 0000.00 .............. $5,000.00
Year 6...... $ 6,000.00 ............. $ 0000.00 .............. $6,000.00
Year 7...... $ 6,000.00 ............. $1,000.00+............. $7,000.00
Year 8...... $ 6,000.00 ............. $1,000.00+............. $7,000.00
Year 9...... $ 6,000.00 ............. $2,000.00+ ............ $8,000.00
Year 10.... $ 6,000.00 ............. $2,000.00+............. $8,000.00
Year 11.... $ 7,000.00 ............. $3,000.00+ .......... $10,000.00
Year 12.... $ 7,000.00 ............. $3,000.00+ .......... $10,000.00
Totals....... $65,000.00 .......................................... $77,000.00

Now is it fair?

So, you're stuffed either way !!!

Only the gov't could turn a negative into a positive !!!

And Brenda - they got me on that too !!!


It's ridiculous - I'd be better off getting some crappy job working a few days a week and not investing - then everyone else could support me too !!! I'd have less stress and more time with family!


&%^***^%$^%$# :mad: :mad: :mad: :mad: :mad: :mad:

Brains - It should be on a current affair.

Tagline - Centrelink punishes families trying to get ahead....

Intro - Here's how Centrelink actively discourages people from working hard to get ahead......

Hard Worker
Salary say $60,000 (works hard to get a good job)
Neg Gear property say $30,000 ($8,000 dep'n, remaining real cost)
Buying your house
Centrelink says you earn $90,000. Stuff all benefits for you.

Slacko
Salary say $25,000 (Accepts easy job)
Rent a house
Centrelink says - poor you, here's lots of money and rent assistance.

I don't have so much a problem with the less advantaged getting a hand, but I do have a problem when they slap you around for trying to do better - while going without immediate "pleasures".

I've been on the phone today with centrelink about the same thing (thanks to their well timed letter).

We had a centrelink lady pretty much say "FPO is not for people like you", "You dont deserve anything with your property", oh - and said my wife should be working rather than being around for the kids. Priceless !!

Suffice to say, my phone call to her supervisor was somewhat direct.....


Bloody Unbelievable !!!


Grrr....



Simon.

[Blitzkrieg]

ummmmmm......... speaking quietly..................

My understanding would be

Salary say $60,000 (works hard to get a good job)
Neg Gear property say $30,000 ($8,000 dep'n, remaining real cost)
Buying your house

income for "tax purposes" $30,000 (probably big tax return)

income for FTB purposes $60,000 (you "chose" to spend your spare money on your personal wealth creation and not your kids)

they are calculated differently but you are not penalised for having a negative geared property as the previous example shows


I don't work for the government or believe it is right or wrong but the last example was very misleading

(at least that is how it was applied to me)

[sbe]

Hi Blitz.

Taking your point, you have to remember that any tax return should be so - it's income AFTER expenses. This is how the ATO sees it. I have no issue paying tax on that - never have.

Also, bear in mind always that eventually I will either pay income tax on the property, or CGT. Again, ONCE I profit from it, no problem either.

I would argue that I (and others) are penalised for having property, as ALL other expenses are taken into consideration for FTB (Business, car etc), PLUS, if I had neg gear shares, they would be. How else would you suggest to take this when property is singled out?

I'd like you (respectfully) to explain why you think my example is misleading. If I used shares or business expenses, it would have worked out how everyone thinks it should. I've even had centrelink employees who cant believe it.

I would also argue that person B chose their career path, so why should I subsidise that? (Now, I accept too that not everyone can do everything, but why should others be 'punished' for trying harder and achieving better?).

Most importantly, if you take it to the extreme (which shows how utterly silly the rule is)....

If Person A loses their job, they are attributed to earning a $30,000 income from the property losses.......

Explain THAT one......


Sorry, but I believe once again it's a case of the system encouraging you NOT to try harder.

I had a conversation with someone (and listened in disbelief), they didn't want to work more than 2 days a week, otherwise it would impact on their payments.

Hmmm..... they work 2 days on, 5 off. Stupid me does the reverse......

I'm open to anyone's explanation of why this is as it should be.......:confused:

[NigelW]

Originally posted by brains
Im with Geoff here. You own 22 houses and have done well over the last couple of years like most of us on here, I think its fair that the government want their money back.

My wife has a friend friend who, with her husband, earn just enough and no more so they can recieve max government benefits. I totally dislike this attitude, my idea is to earn so much that you can forget about government payments forever.


I thought this line was funny:

"For the struggling families with rental properties which may be negatively geared, "you will not get any sympathy from the FTA".

I always thought struggling families were wondering where their next dollar is coming from.

For once *shock horror* I find myself in complete agreement with Brains! :eek:

You can't have it both ways Brenda. Your achievements are an inspiration to us all, and I commend you wholeheartedly, but there's no way you can cry poor. If you've grown too fast and the cashflow's not catching up with your net worth then welcome to the property boom! It's a problem that real battlers would love to have I reckon ;) .

I must admit I find all this "weaseling" to maximise social security type benefits morally repugnant. IMHO time would be better spent seeking out the next opportunity or thinking up ways to boost cashflow...

Bah humbug :p

N.

[sbe]

Nigel, I must take exception to one of your comments - weaseling.

I dont believe Brenda has arranged her affairs to maximise her benefits, and I know I haven't. I think you stooped to emotive language when it wasn't appropriate.

The point is that when asked your income by Centrelink, you tell them the figure from your tax return.

Somehow, they magically make a negative into a positive - and they ONLY, repeat ONLY do that for property.

So, if Brenda, I or anyone else had a business, where we were cashflow negative, they accept you are building for the future (where you will pay tax), and allow it.

However, if Brenda, I or anyone else had a property investment stretegy to achieve the same thing, where we were cashflow negative, they ignore that you are building for the future (where you will pay tax), and disallow it. BUT, they will also tax you later - have the cake and eat it too !

If we did what we are doing with shares instead, they would allow it - why is that so different?!?!?

Add to that, that you have the Treasurer saying that families dont have to pay tax until $xxxxx etc, and it doesn't ring true. Yet they wont allow income sharing for families (which would allow more mums (or dads) to stay home and raise children, saving taxes cause now you dont need childcare so much etc etc....)

My point is, in this particular instance, you are punished for saving for the future. That's what neg gear property is (otherwise, why would you do it?!?!)

I agree with Brains on one very important point he made
I always thought struggling families were wondering where their next dollar is coming from.

I couldn't agree more. I'm sick of hearing everyone have a competition of how poor they are. Yet they don't want for much either.

My wife had an argument with a family member over this. It took a lot to get them to admit that they really wern't poor "in the true sense". Today, if you dont own a house, have two great cars, overseas vacations, foxtel and an xbox, everyone think's they're poor......

It still gets back to a basic point. Fix the tax system PROPERLY, and then welfare should only be needed for the truly needy, not the governments inefficient redistribution system as it is now - where it takes whole departments to take my money as tax, then give it back as a payment. Just tax me less in the first place!


Sorry to rant on a bit. It just gets up my nose when the government seems to so actively encourage you not to do better.

[NigelW]

Originally posted by sbe
Nigel, I must take exception to one of your comments - weaseling.

I dont believe Brenda has arranged her affairs to maximise her benefits, and I know I haven't. I think you stooped to emotive language when it wasn't appropriate.

The point is that when asked your income by Centrelink, you tell them the figure from your tax return.

Somehow, they magically make a negative into a positive - and they ONLY, repeat ONLY do that for property.

So, if Brenda, I or anyone else had a business, where we were cashflow negative, they accept you are building for the future (where you will pay tax), and allow it.

However, if Brenda, I or anyone else had a property investment stretegy to achieve the same thing, where we were cashflow negative, they ignore that you are building for the future (where you will pay tax), and disallow it. BUT, they will also tax you later - have the cake and eat it too !

If we did what we are doing with shares instead, they would allow it - why is that so different?!?!?

Add to that, that you have the Treasurer saying that families dont have to pay tax until $xxxxx etc, and it doesn't ring true. Yet they wont allow income sharing for families (which would allow more mums (or dads) to stay home and raise children, saving taxes cause now you dont need childcare so much etc etc....)

My point is, in this particular instance, you are punished for saving for the future. That's what neg gear property is (otherwise, why would you do it?!?!)

I agree with Brains on one very important point he made


I couldn't agree more. I'm sick of hearing everyone have a competition of how poor they are. Yet they don't want for much either.

My wife had an argument with a family member over this. It took a lot to get them to admit that they really wern't poor "in the true sense". Today, if you dont own a house, have two great cars, overseas vacations, foxtel and an xbox, everyone think's they're poor......

It still gets back to a basic point. Fix the tax system PROPERLY, and then welfare should only be needed for the truly needy, not the governments inefficient redistribution system as it is now - where it takes whole departments to take my money as tax, then give it back as a payment. Just tax me less in the first place!


Sorry to rant on a bit. It just gets up my nose when the government seems to so actively encourage you not to do better.

SBE your rant is welcomed!

I think the problem is you expect the tax system to be fair, equitable and the government to act rationally and in the best interests of the nation at large. :D Ain't gonna happen when political vision extends only to the next election...

Fix the tax system? is that a pig whizzing by the 37th floor???

The tax system is unfair in many ways. Property investors get slugged with a lot of taxes cause it's easy - like shooting fish in a barrel. You've just gotta deal with it and move on.

I don't know Brenda's circumstances and I don't want to know. My comment is merely that she's crying poor-mouse when she owns or controls a substantial property portfolio. If she's structured her affairs so that the portfolio is cashflow negative that's her problem to deal with. You've gotta take the cashflow restrictions that high levels of gearing can create with the great benefit of leveraging your equity to that extent to maximise capital gains...AND one of the downsides seems to be that you can lose some sort of family assistance. Tough. Or perhaps just some "tough love" :rolleyes: because as I say, I respect Brenda's achievements but deplore the general attitude of mooching (ooops there's another emotive word :eek: ) to maximise welfare when there's not true hardship.

Cheers
N.

[sbe]

Thanks for the smile your reply bought to my face..... :D



I thought I saw that same one flying by the other day......;)


I agree the Gov't does like shooting fish in a barrel -just look at Melbourne speed camera's (3km/h tolerance on a straight freeway). Funny thing is, they're suspended while they're checked out now...... something about a Datsun 120Y being clocked at 167KM I believe.........:eek:

I agree with you about the general attitude of mooching, but the problem is, they Gov't structure is such that it fosters an attitude of entitlement. If welfare was genuinely welfare, that wouldn't be a problem. Unfortunately, it isn't. :(

One day we will get a gov't that has the guts and vision to fix all this........Of course Santa, the tooth fairy and the easter bunny all agree with me too !!!! :p :p

Alas, those with the best accountants win again......:rolleyes:

Cheerio.

Simon.

[Blitzkrieg]

If Person A loses their job, they are attributed to earning a $30,000 income from the property losses.......

Explain THAT one......


Again this is my understanding:

old scenario

Salary say $60,000 (works hard to get a good job)
Neg Gear property say $30,000 ($8,000 dep'n, remaining real cost)
Buying your house

income for "tax purposes" $30,000 (probably big tax return)

income for FTB purposes $60,000 (you "chose" to spend your spare money on your personal wealth creation and not your kids)


New scenario - loses his job:

assuming no job for entire year (borrows money off mum and dad to buy food)

Income for tax purposes -$30,000 to be caught up next year when he gets his act together

Income for FTB purposes = actual total income - ALL deductions + deductions claimed for real estate investment = $0

Again they don't add it to your total income. Another way to look at it is that they don't include any loss from you real estate investment for the FTB, so then it is:
FTB = total income - work related expenses (laundry etc.) and that's it! No such thing as a real estate loss in the calculation. What doesn't happen is they take the loss off the total income and then add it on again! Then they are double dipping!

I believe it works that, like I said before, you have desposible income that you choose to spend on creating income and tax later, but you don't deserve extra child welfare payments because if you needed them then you wouldn't be spending your money on real estate investing.

I don't know if it doesn't apply to other forms of investment or not, and if it doesn't then that certainly is not fair - with the exception of self employed people because that is there job and expenses are necessary to earn the income just to survive.

I have been bitten by this be guessing my income (including a rent loss) but understand why it is applied the way it is. And, not allowing for the way it is applied to other forms of investment, I believe it is fair.


This is my longest post ever, I hope I made sense,
Blitzkrieg

[sbe]

Hi Blitz.
Your post certainly made sense (more so than most Centrelink employees too!).

I'm actually going to request it in writing from Centrelink, because how you explained it is how I thought it would work, but a Centrelink person has also contradicted that explanation.

ie. They dont even know the rules, so how can anyone else hope to ???

It'd be interesting to see also how they treat those loses moving forward when you 'get your act together'.

I just find it frustrating that only real estate is singles out. Shares aren't. Go figure !

Thanks for taking the time to reply. Your viewpoint has been great.

Happy new year to all.

Simon.

[Blitzkrieg]

no probs.

I hope I'm right :p

[dtraeger2k]

Hi,

I got kinda angry and confused when I read this thread. I'm not sure what the heck you people are thinking. I thought the whole idea of investing (in anything) was to escape the need of handouts, forever?

-Regards

Dave

[sbe]

Hi Dave.

Let me try to explain it (without writing an essay....)

You are spot on (at least for me anyway), I don't want Gov't handouts like a pension. I plan to be self supporting, possibly paying tax even (hopefully not).

The issue I (and others) have, is that the way it's currently structured, if you choose to invest in property, you are (typically) incurring a cost today for a benefit tomorrow. That's fine, but the Gov't chooses not to acknowledge that.

ie. By sacrificing today, I have to live off less (as do my family), as the gov't ignores the loss incurred. They will however tax that when it reverts to income.

So, by getting a better job, investing for a future (so I don't need gov't assistance), I am rewarded by receiving less family payment than someone who does nothing but ends up with the same disposable income, then wants a pension the other end....

The annoyance is, Family Payment used to be simply a different tax scale applied to your income (No dependants, 1,2,3 dependants etc). This was smart, as the Gov't simply took less tax in the first place.

Now, the gov't taxes me fully, gives the money to Centrelink, who then gives some back to me. Bloody inefficient really. Especially as they now apply all these rules. It's should be simple - you have x dependants, that raises your tax free threshold to $xx,xxx (which is how it's supposed to work).

The first thing to remember - we're talking about money the gov't took out of my pay in the first place. It takes millions and millions of dollars to have Centrelink recycle that money back to me - much easier to not take it in the first place.

Of course, then you get onto the whole tax / welfare topic. Why does the gov't choose to 'program' us to expect a handout (Family Payment, Rent Assistance etc etc etc).

Welfare should be when you have no job. Otherwise, the tax system should be such that it doesn't take what it has to give back (inefficiently, at great cost). It would also get people more programmed into accepting responsibility for their own financial situation.

Whoops. Said I wansn't going to write an essay......

Oh well.

Hope that makes sense Dave.....

Cheerio

Simon.

[Joe D]

I understand the problem but don't see the difficulty.

If you have IPs, then leave this until your yearly tax return is prepared rather than claiming as a periodic payment throughout the year.

This is the simplest method .....

However, if you choose to take periodic payment option to help cashflow and you gain (ie overpayment) from this method, then you pay back .....

I agree its not the best method, but personally I don't see why anyone should take issue with it.

Joe D

[Blitzkrieg]

Hi sbe,

Wow, I see a little of my ignorance and understand some of your frustration now, I am only 24 and my sons are 2 1/2 years and 2 months old so I've only known the tax system the way it is now!

You do make it sound like a VERY inefficient way of taxing the plebs and I really like the idea of doing away with the FTB and just raising the tax thresholds dependant on ... well ... dependants. Did they used to do it like that? No wonder you're getting annoyed with the new tax system because now.

The way it seems is that if your poor its good to have kids because you will get lots of money and support from the government who at the end of the day want more people in Australia who then pay taxes when they get old and get jobs, etc. etc. But if you work hard to get yourself in a comfortable position, you don't deserve the same support and encouragement to raise kids, hmm at least with that system their will be more "little aussie battlers" to rent my houses :D