Centrelink - Assessible Income

[ritchie77]

I have been reviewing the Centrelink's determination of assessible income and have looked at the comments on this site in an attempt to simplify my (and others) understanding. Here is a description of inclusions for assessible income for the Income Test for various things such as FTB, baby bonus etc:

Examples of assessable income include:
deemed income from financial investments
gross income from earnings, including fringe benefits
employment income salary sacrificed into superannuation
net income from businesses, including farms
family trust distributions or dividends from private company shares
net income from rental property
total net losses from rental property
income from boarders and lodgers
deemed income on money in superannuation funds if you have reached age pension age
reportable superannuation contributions (salary sacrificed contributions)
non-Australian pensions and income
any income from sources outside Australia
income from income stream products, such as annuities, allocated products and superannuation pensions.

Therefore, I will use my example with particular reference to the following factors to see if I correctly understand - I have rang Centrelink and reviewed the website but it is still not clear and confusing that rental losses are ADDED to income??!?!?

For example, if I had PAYG income of $100k and my partner had $25k and I had the following investment proerty losses:

Income 50k
Expenses 100k
Net Income/loss ($50k) LOSS

Would this therefore mean per the Centrelinks calculations that we (family) have assessible income of $175k ($100 + 25 + 50k) and therefore ineligible for the baby bonus?

The Centrelink site details the following inclusions for Assessible Income and I have included in brackets the totals from above for illustrative purposes):

Earnings (100k + 25k)
net income from rental property (do we also include rent here or is this doubling uo?)
total net losses from rental property (50k)

This ruling seems very confusing and whilst I do have a business/finance background and do understand these terms would appreciate feedback from others with experience or knowledge in this area to give us their take on above and whether families in that position are eligible for baby bonus and correct amounts to record?

Thanks

Ritch

 

[alexlee]

I thought you start off with your net taxable income.

So in your case, it would be 100 + 25 - 50 = 75k taxable income.

add back rental losses +50k

Assessable income for Centrelink purposes = +125k.

 

[rugrat]

The way we estimate it for FTB and baby bonus is:

Gross tax assessable job income. (for most people this will be their entire gross income, but we have some exempt income such as army reserves pay)

Plus gross rental income. (if you just use the gross rental income, then there is no need to 'add' anything back, because you haven't taken it out in the first place)

This has been the easiest way to work it for us, and we have been assured that this should result in the correct payment (guess I will find out for sure after we file our tax return ).

 

[Fat Mal]

I rang Centrelink about this exact same thing last week.
They told me you add your rental losses to your salary & that is your assesable income for the Family tax.
I could not work out why you are assesed on you losses, but CL says so you can't claim twice GO FIGURE

 

[Emo21]

now how does that make sense - adding a loss to a income will not give you accessible income. cant access a loss.

had a look at family assist web site and logged in then went to the family income updater and found this under "tips on how to update your income"

Real Estate
You need to include all income you (and your partner) expect to get from rental property/properties that you own or partially own such as rent for a property, a room in your house, unit, pasture and boats.
If you expect to make a loss, subtract the loss amount to estimate your total taxable income.

 

[ritchie77]

Yes I agree seems strange you add losses onto your earnings to get AI but meh what can you do...... maybe one day they will change it

Thanks for your input guys....

 

[veebeeseewee]

Initially I thought centrelink was asking for gross income to be assessed but in fact they are asking for taxable income, ie gross income minus any deductible. With the investment loss, that will also include on-paper loss.

Like rugrat said, gross income will do the job, because it's gross income - loss + loss! What's the point of having the investment loss section there in the first place?!!

 

[RumpledElf]

Its more of a problem when your *only* income is a loss, like you and the wife own half a house each that makes a loss of say $50k, and she is a stay at home mum with no other income.

She's then assessed as earning $25k and since they cut down your FTA/B down when the lower earner makes more than $4k suddenly you're left with almost no FTA/B when you would have been getting the full amount if the wife was earning $0.

The $4k limit has been there for a decade or so, unindexed, and it is a nasty hit when you're both earning very low amounts, you end up with far less FTA/B than a couple on several x your income but one high/medium earner instead of two low ones.

It is quite a strange system.

 

[tobe]

I never estimate my 'income' to centrelink, too confusing.

I always do my tax returns on time, they can use the figures off that. My wifes income dropped last FY due to another child. This may result in overpayment next FY if she takes on more hours this year, however I cant see it being sheep stations, especially as the net result of her working (with child care costs etc) is acutally pretty static.

 

[Rob G.]

I rang Centrelink about this exact same thing last week.
They told me you add your rental losses to your salary & that is your assesable income for the Family tax.
I could not work out why you are assesed on you losses, but CL says so you can't claim twice GO FIGURE

You are not assessed for tax on your "losses" by virtue of the use of taxable income as the tax base.

To the extent you have net investment losses, adding back does not assess you again, it merely prevents excess deductions being allowed in calculating your ATI for Centrelink.

Cheers,

Rob

 

[ritchie77]

Baby Bonus Calcs??

Had a call from Centrelink today re the baby bonus calcs and the following is a rough calculation of what happened (figures changed to make it easier to understand):

Gross wages (total): $110k pa
Net Rental Property loss $40kpa
Taxable Income = $70kpa

When we half those for baby bonus eligibility it gives me the following for the 6 months (remember you are supposed to be under $75k for the family for 6 month period):

Taxable Income $35k
+ Rental Property loss of $20k
= Total of $55k (which made us eligible)

At least thats what I thought!!
Turns out the following is how Centrelink works it out:


Adjusted taxable Income of $55k (ie taxable income of $35k then addback the rental property loss of $20k)
+ Rental property loss of $20k
= Total of $75k (adjustable taxable income).

iT IS ACTUALLY A FEW K MORE BUT YOU GET THE PICTURE - WE MISSED OUT!?!?!

Is this correct? I still cant quite work out how you gwt charged TWICE for your net rental property deductions and it takes us over the limit!

Any other comments/feedback would be great as I am not sure if this is correct or whether we just have to take it!

R

 

[dan c]

They are charging you twice for your rental losses, which isn't correct.

The calculation for adjusted income is taxable income + investment losses + reportable super + adjusted fringe benefits + any tax free pensions.

Looks as though they have used your gross income, rather than taxable income.

Not sure how you go about getting them to correct it though.

 

[wobbycarly]

The theory is that if you've already had a tax deduction for the rental losses (hence lower taxable income) then FTB will be 'double-dipping'.

 

[gottabespotless]

Not sure how you go about getting them to correct it though.

Centrelink do a reconciliation with the ATO after you and your partner have lodged your tax returns for the year - that's how they know if they've overpaid/underpaid people.

Rental property losses are recognised by the ATO but not through Centrelink. Unlike the ATO, Centrelink don't care if you made a decision to buy something that costs you more than it makes. They only care about the income that goes into your bank account from it each month.

As wobblycarly stated, the ATO (same 'purse') have already allowed you to lower your income (resulting in you paying less tax) through neg gearing - they don't want you perhaps being entitled to any extra FTB A/B payments as well. Why? Because they'd see it as helping fund people's investment choices... twice.


* Please note that this is not necessarily what I agree with (I'm in the same boat) but it's how Centrelink view it. We always defer any possible Centrelink payments until we have done our tax returns as we are never sure, with any certainty, how much our family income is going to be. This takes away the worry of being overpaid - and it's a nice little bonus that we haven't needed or missed throughout the year if they do deem that we were entitled to anything.

Cheers.

 

[dan c]

I understand that Centrelink add back any investment losses, but in ritchie's example above, they have effectively added it back twice.

Reading the literature, it should be added back to the taxable income, not the gross income.

 

[ritchie77]

hmmm..... starting to make a bit more sense now - so maybe it is right and they are charging me double! Simply because we have already had the deduction from the ATO......

As you say I dont agree but it is what it is. I will ask Centrelink as they seemed uncertain the reasons when they rang me.

Thanks R

 

[gottabespotless]

I understand that Centrelink add back any investment losses, but in ritchie's example above, they have effectively added it back twice.

Reading the literature, it should be added back to the taxable income, not the gross income.

Thanks, Dan. Actually, only the first part of my post was to you - then I got carried away with the original question of why does Centrelink add on rental losses (lots of people seem to be confused with this ).

It certainly looks like Centrelink have stuffed up with Ritchie's calcs. The taxable income should not have the rental income added to it and then the rental income loss added again. Ritchie, it will be noticed after Centrelink reconcile with the ATO but you shouldn't have to wait that long. Can you speak to someone else at Centrelink about it?

 

[knightm]

I'm in the same boat as Ritchie currently being double charged on the FTB and CCB fronts. Have had a range of different and conflicting advice from call centre staff at Centrelink. My accountant swears a range of colours that I should not be double charged.

His explaination "the point of it all is to get you back up to your original gross salary amount so the FTB calculates on that, not an artificially low or high amount"

I am making it a new years resolution to resolve next month or so in person at my local office if possible. Will post any results when I get them.

 

[Ed Barton]

I'm in the same boat as Ritchie currently being double charged on the FTB and CCB fronts. Have had a range of different and conflicting advice from call centre staff at Centrelink. My accountant swears a range of colours that I should not be double charged.

His explaination "the point of it all is to get you back up to your original gross salary amount so the FTB calculates on that, not an artificially low or high amount"

I am making it a new years resolution to resolve next month or so in person at my local office if possible. Will post any results when I get them.

how about you post the details and we can leave you even more confused.

so are you trying to double dib the system?

 

[knightm]

how about you post the details and we can leave you even more confused.

so are you trying to double dib the system?

No I am not trying to double dib...just want to know what the policy actually is, and still quite confused over it have been told several interpretations.

Details:

*I earn PAYE wage $X
*Wife not in paid work 4 young children 3 still at home, 2 next yr, no other income for her
*2 IP's, one in my name only, 1 50/50 (I know, didn't think structure through too carefully when we bought and were both working)
* I have net rental loss on both properties, wife on 1

Current my FTB family assessed income is approx 38k OVER my gross PAYE income.

My accountant said the intention was to prevent me getting a tax rebate on the properties then crying poor to FAO - with an assessed income of X minus the property losses. He said the property losses should be added to my taxable income, not my gross income. They should take my FTB assessed income back up to my gross salary level, not substantially over it. He also is of the position that my wife should not be deemed as having income, but she is.

FAO have on some occasions agreed with this and on other disagreed, and on still others been unintelligible all together.

Clear as mud?