Warning- Family Tax Benefit

[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"

 

[MarkB]

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

 

[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....

 

[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'

 

[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!


&%^***^%$^%$#

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.......

 

[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!

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

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. 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" because as I say, I respect Brenda's achievements but deplore the general attitude of mooching (ooops there's another emotive word ) to maximise welfare when there's not true hardship.

Cheers
N.

 

[sbe]

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



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.........

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 !!!!

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

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