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

 

[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

 

[MarkB]

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

 

[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 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: [email protected]

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.