bO2 2022 – Ch 6 – Tax Offsets

James Murphy


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TAX OFFSETS ARE DIFFERENT TO DEDUCTIONS

Tax offsets – which are different to tax deductions – allow some individual and business taxpayers to reduce the amount of tax they pay when they lodge their tax returns.  Pensioners, small businesses, low-income earners, and parents are among those who may be entitled to this concession.

Tax offsets are slightly different to a tax deduction, which is taken off a person’s income before the tax is calculated.  With tax offsets, the Tax Office works out how much tax a person should pay then reduces that amount by the tax offsets available.

Generally, there are three types of tax offsets – those that:

  • Provide tax relief for personal circumstances – for example, offsets for senior Australians and people living in remote areas.
  • Give you a credit for an amount of tax that has effectively already been paid – such as credits for franked dividends and foreign tax; and
  • Provide an incentive – for example, the tax offset for mature age workers and the private health insurance rebate.

In most cases, tax offsets can only reduce the amount of tax you pay to zero.  In other words, you generally do not get a refund if the offsets are greater than the tax that is payable.

The only tax offsets that provide a refund are the private health insurance rebate and franking tax offset.

Tax offsets, in general, do not reduce your Medicare levy.  However, if you have excess refundable tax offsets available – such as those mentioned above – these can reduce your tax, including the Medicare levy.

DEPENDANT OFFSETS ABOLISHED

The Government abolished nearly all the dependant tax offsets, including the dependent spouse tax offset (DSTO), for all taxpayers from 1 July 2014.

A new dependant offset was introduced with effect from the 2012-13 income year – the dependant (invalid and carer) tax offset (DICTO).  As a result, access to the DSTO was restricted to those taxpayers whose spouse was born before 1 July 1952 and to taxpayers who qualify for the zone tax offset (ZTO), overseas civilians tax offset (OCTO) or overseas forces tax offset (OFTO), regardless of the age of their dependent spouse.

In addition, access to the other dependant tax offsets – namely the invalid spouse, carer spouse, child-housekeeper, invalid relative, parent and parent-in-law offsets and the housekeeper tax offset was limited to those taxpayers who qualify for ZTO, OCTO or OFTO.

The Government then announced that the DSTO and the other dependency offsets would be abolished from 1 July 2014.  The housekeeper offset was also abolished from 1 July 2014.

From 1 July 2014, taxpayers who qualify for ZTO, OCTO and OFTO may qualify for the DICTO.  Further, taxpayers with dependants who are genuinely unable to work due to a carer obligation or a disability may be eligible for the DICTO.

 LOW-INCOME TAX OFFSET (LITO)

 LITO amounts from 2020/2021 onwards 

Taxable Income (TI) Reduction in Offset (RI) Maximum Offset
$37,500 or less  Nil $700
$37,501 to $45,000 (TI – $37,500) x 0.05 $700 – RI
$45,001 to $66,666 (TI – $45,000) x 0.015      $325 – RI
$66,667 +   Nil

 

Low- and Middle-Income Tax Offset 

The 2019 Federal Budget announced measured increases to the LMITO values from the 2018-19 year through to 2021-22. The LMITO base amount will increase from $200 to $255; the maximum amount will increase from $530 to $1080. Revised income tests also apply.

LMITO 2018-19 TO 2021-22

Income Offset
Up to $37,000 $255
$37,001 to $48,000 $255 plus 7.5 cents for each dollar over $37,000
$48,001 to $90,000 $1,080
$90,001 to $126,000 $1,080 less 3 cents for each dollar over $90,000

 

As before, the LMITO will be paid in arrears by inclusion in the tax assessment upon tax return lodgement after the end of the financial year. 

INCOME MEANS TESTING FOR OFFSETS 

There is an income threshold to determine whether a taxpayer is eligible for the following offsets:

  • Seniors and pensioners tax offset
  • Invalid and invalid carer offset
  • Spouse super contribution offset
  • Net medical expenses tax offset 

BENEFICIARY TAX OFFSET

If you received one or more of the payments listed below, you might be entitled to a beneficiary tax offset.  Beneficiary offsets are calculated to reduce tax which would be otherwise payable on beneficiary allowances.

The following list shows the payments and allowances that qualify for the beneficiary tax offset:

  • Parenting payment (partnered)
  • Newstart allowance
  • Youth allowance
  • Mature age allowance
  • Partner allowance
  • Sickness allowance
  • Special benefit
  • Widow allowance
  • Austudy Payment
  • Exceptional circumstances relief payment or farm help income support
  • Education payment of any of the following, at 16 years or older:
  • ABSTUDY living allowance
  • Payment under the veterans’ children education scheme
  • Payment under the assistance for isolated children scheme
  • Payment under the Military Rehabilitation and Compensation Act Education and training scheme 2004 – shown as ‘MRCA education allowance’ on your PAYG payment summary – individual non-business.
  • Training for employment programme allowance; new enterprise incentive scheme allowance; textile, clothing, and footwear special allowance; green corps training allowance; or other taxable Commonwealth education or training payments.
  • Income support component from a community development employment project (CDEP) – shown as ‘CDEP salary or wages’ on your PAYG payment summary – individual non-business.
  • CDEP scheme participant supplement. 

BENEFICIARY TAX OFFSET 

Section 160AAA specifies the types of payments which are eligible for the rebate. They include a number of social security benefits (not the age pension, for which see SAPTO) and special payments such as drought relief and CDEP wages.

Beneficiary Rebate Amount (Tax Offset) – Calculation

The basic formula is:

Income Offset calculation
$0 to $37,000 15% of [Rebatable benefits – $6,000]
Over $37,000 15% of [Rebatable benefits – $6,000] + 15% of [Rebatable benefits – $37,000]

 

If your ONLY income is from eligible payments, the beneficiary tax offset will ensure that you pay no tax. 

ZONE TAX OFFSET

Taxpayers who live in remote areas of Australia may be entitled to a Zone Tax Offset depending on the amount of time spent in the relevant zones.

In general, taxpayers qualify as residents of a zone where they reside in the zone (not necessarily continuously) for 183 days or more.  Remote areas do not include offshore rigs.  To find out whether a location is currently in a “zone” or “special” area, refer to the ‘Australian Zone list’ available on the ATO website.

The 2020/21 rates are set out below:

Description Maximum Offset

$

Special Area in

Zone A

$1,173 + 50% of the relevant dependant rebate amount
Special Area in

Zone B

$1,173 + 50% of the relevant dependant rebate amount
Zone A $338 + 50% of the relevant dependant rebate amount
Zone B $57 + 20% of the relevant dependant rebate amount

 

From 1 July 2015, you can claim the zone tax offset if your usual place of residence was in a remote or isolated area (known as a zone) during the income year.

If your usual place of residence was in a zone for less than 183 days in the income year, you might still be able to claim the tax offset as long as your usual place of residence was in a zone for a continuous period of less than five years and:

  • you were unable to claim in the first year because you lived there for less than 183 days
  • the total of the days you lived there in the first year and the current income year is 183 or more

The period you lived in a zone in the current income year must include the first day of the income year.

Any discretion exercised by the Commissioner for the zone tax offset will be made with reference to your usual place of residence.

Fly-in Fly-out “FIFO” and Drive-in drive-out “DIDO” workers lose zone rebate 

From 1 July 2015, the zone rebate entitlement is no longer available to FIFO and DIDO workers where such workers do not have their usual residence in an identified geographic zone currently classified as eligible for the ZTO.

NET MEDICAL EXPENSES TAX OFFSET

From 1 July 2019 (i.e. from the 2020 income year), the NMETO was abolished for all taxpayers. 

SENIORS AND PENSIONERS TAX OFFSET (SAPTO)

From 1 July 2012, the pensioner tax offset merged with the more generous Senior Australian’s Tax Offset (SATO) to form the new Seniors Pensioners Tax Offset (SAPTO). 

Rebate Income Thresholds 2020/21 

Family Situation Maximum Offset

$

Shade-out

Threshold

$

Cut-out Threshold

$

Single, separated or widowed 2,230 32,279 50,119
Each member of a couple (married or de facto) 1,602 28,974 each 41,790 each
Each member of a couple (married or de facto) separated due to illness or because one was in a nursing home 2,040 31,279 each 47,599 each

 

REFUNDING FRANKING CREDITS – INDIVIDUALS

Dividends paid to shareholders by Australian resident companies are taxed under a system known as ‘imputation’.  It is called an imputation system because the tax the company pays is imputed or attributed to the shareholders.  The tax paid by the company is allocated to shareholders by way of franking credits attached to the dividends they receive.

You include an amount equal to the franking credit attached to your dividend in your assessable income.  You are also entitled to a franking tax offset equal to the amounts included in your income.

The franking tax offset will cover, or partly cover, the tax payable on the dividends.  If the tax offset is more than the tax payable on the dividends, the excess tax offset will be applied to cover, or partly cover, any tax payable on other taxable income received.

If any excess tax offset amount is left over after that, the Tax Office will refund that amount to you.

BRIEF SUMMARY OF 2020/21 PERSONAL TAX OFFSETS

DICTO max offset $2,816
DICTO cut-off (dependent’s ATI) $11,546
DICTO cut-out (taxpayer’s ATI) $100,000
Ordinary Zone A $338 + 50% DICTO
Ordinary Zone B $57 + 20% DICTO
Special Zone A or B $1,173 + 50% DICTO
Low-income max offset $700
Low income shade-out (1.5c per $1) $37,500
Low income cut-out $66,667
SAPTO (single) max offset $2,230
SAPTO (single) shade-out (12.5c per $1) $32,279
SAPTO (single) cut-out $50,119

 

PRIVATE HEALTH INSURANCE REBATE

From 1 July 2012, the private health rebate is income tested against three income tier thresholds.  Higher-income earners will receive less private health insurance rebates or, if they do not have the appropriate level of private patient hospital cover, the Medicare Levy Surcharge may increase.  The income threshold calculation is based on the definition of income used to calculate Medicare Levy Surcharge for individuals or families.

The 2020-21 income thresholds are provided in the below table.

  Base Tier $ Tier 1 $ Tier 2 $ Tier 3 $
Income Thresholds
Singles
Singles 90,000 or less 90,001 – 105,000 105,001 – 140,000 140,001+
Families / Couples
0 dependants 180,000 or less 180,001 – 210,000 210,001 – 280,000 280,001+
1 dependant 180,000 or less 180,001 – 210,000 210,001 – 280,000 280,001+
2 dependants 181,500 or less 181,501 – 211,500 211,501 – 281,500 281,501+
3 dependants 183,000 or less 183,001 – 213,000 213,001 – 283,000 283,001+
4 dependants 184,500 or less 184,501 – 214,500 214,501 – 284,500 284,501+
5 dependants 186,000 or less 186,001 – 216,000 216,001 – 286,000 286,001+
Each extra child 1,500 1,500 1,500 1,500
Rebate 1 April 2020 to 31 March 2021
Aged under 65 25.059% 16.706% 8.352% 0%
Aged 65 – 69 29.236% 20.883% 12.529% 0%
Aged 70 or over 33.413% 25.059% 16.706% 0%

 

  • Rebate percentages are adjusted annually on 1 April.
  • Income for surcharge purposes is measured for the financial year ending 30 June and includes, among other things, taxable income, reportable fringe benefits amounts, reportable superannuation contributions and net investment losses.
  • The family income thresholds are increased by $1,500 for each dependant child after the first child.

PAID PARENTAL LEAVE

A Government-funded Paid Parental Leave scheme has been available for eligible recipients from 1 January 2011.  The parental leave payment is equal to the federal minimum wage (currently $772.55 per week) and can be paid for up to 18 weeks.

Your partner may also be eligible for day and partner pay after for up to two weeks. This means your family can receive up to 20 weeks’ pay.

The primary carer must have adjusted taxable income of $151,350 or less for the financial year prior to the child’s birth or adoption and have satisfied a work test.  The work test requires that claimants have worked at least 330 hours (on average just over one day per week) during 10 of the 13 months before the birth or adoption, with no more than an eight-week gap between consecutive work days; therefore, the work test cannot be satisfied by only working full-time for two months prior to the birth of a child.

The Newborn Upfront Payment & Newborn Supplement is for children born, taken into care for at least 13 weeks, or placed for adoption after 1 March 2014.

The Newborn Upfront Payment is $575, while the Newborn Supplement will total $1,725.36 for their first child and $576.03 for subsequent children. To receive the maximum Newborn Supplement payment, you need to be eligible for the base rate of FTB Part A; if you are eligible for less than the base rate, your payment will be reduced. Also, you must not be getting parental leave pay for the same child.

This measure will also amend the Paid Parental Leave work test.  Families with children born or adopted within 13 months of each other will have their previous Paid Parental Leave period count towards the work test for their next child.  This will allow families to qualify for Parental Leave Pay more easily for their second child. 

EMPLOYMENT TERMINATION PAYMENTS

ETPs can comprise of two different components:

  • a tax-free component
  • a taxable component.

Tax is only withheld from the taxable component. Depending on the type of ETP, the concessional tax treatment may be limited to the smaller of:

  • the ETP cap
  • the whole-of-income cap.

The top rate of tax applies to amounts paid in excess of these caps.

The ETP cap amount for the 2021–22 income year is $225,000. ($215,000 for 2020/21) This amount is indexed annually.

The whole-of-income cap amount for the 2020/21 and 2021/22 income years is $180,000. This amount is not indexed. This cap is reduced by any other taxable income payments the employee receives in the income year – for example, salary or wages.

In some cases, you may need to include an ETP in the taxable payments when working out the whole-of-income cap.

The ETP payment summary has an ETP code that you use to describe the type of ETP and which cap has been applied to it.

FOREIGN INCOME TAX OFFSET

The purpose of the foreign tax credit offset is to relieve double taxation, where tax has been paid in a foreign country on income subject to tax in Australia.

Offsets are a reduction of tax payable. The foreign tax offset is non-refundable – i.e. the amount of the credit is limited to the amount of Australian tax payable (including Medicare levy and surcharge), and any difference is not refunded, nor can it be carried forward to future years.

The entitlement to a foreign income tax offset is provided for and governed by Division 770 of the Income Tax Assessment Act 1997.

TEMPORARY LOSS CARRY-BACK EXTENSION

On 11 May 2021, as part of the 2021-22 Federal Budget, the Australian Government announced it would extend the loss carry-back measure by one year until 30.6.2023.

On 6 October 2020, as part of the 2020-21 Federal Budget, the Australian Government announced it would target support to businesses and encourage new investment through a loss carry back regime. Eligible corporate entities that previously had an income tax liability in a relevant year and have subsequently made taxable losses can claim a refundable tax offset up to the amount of their previous income tax liabilities.

The measure interacts with the announcement on JobMaker Plan – temporary full expensing to support investment measure. This will allow new investment to generate significant tax losses, which can be carried back to generate cash refunds for eligible businesses.

Eligible corporate entities with less than $5 billion turnover in a relevant loss year can carry back losses made in the 2019-20, 2020-21 and 2021-22 income years to a prior year’s income tax liability in the 2018-19, 2019-20 and 2020-21 income years.

The amount of the tax offset is limited by – the corporate entity’s income tax liabilities in the relevant gain years and its franking account balance at the end of the financial year in which the entity files its tax return claiming the loss carry back tax offset (that is, in the 2020–21 or 2021–22 income year).

The law commenced on 1 January 2021. If eligible, corporate entities can claim the tax offset in their tax returns for the 2020–21 and 2021–22 income years.

The instruction guide includes further guidance on this measure, including how to claim the tax offset, which is included in the relevant company tax returns.

RESEARCH AND DEVELOPMENT 

The Research and Development (R&D) tax incentive replaced the R&D tax concession from 1 July 2011.  It provides targeted R&D tax offsets designed to encourage more companies to engage in R&D.  The incentive has two core components.

Entities engaged in R&D may be eligible for:

  • A 43.5% refundable tax offset for eligible entities with aggregated turnover of less than $20 million per annum, provided income tax-exempt entities do not control them.
  • A 38.5% non-refundable tax offset for all other eligible entities. Entities may be able to carry forward unused offset amounts to future income years).

Note that from 1 July 2021, these offset amounts will be amended with the introduction of enhanced reforms to the R&D Tax Incentive.

The rate of the R&D tax offset is reduced to the company tax rate for that portion of an entity’s notional R&D deductions that exceed $100 million for an income year.  This change applies to assessments for income years starting on or after 1 July 2014 and before 1 July 2024.

The R&D tax incentive aims to boost competitiveness and improve productivity across the Australian economy by:

  • Encouraging industry to conduct R&D that may not otherwise have been conducted.
  • Improving the incentive for smaller firms to undertake R&D.
  • Providing business with more predictable, less complex support.

The ATO and Innovation Australia jointly administer the R&D tax incentive.  Your R&D activities must be registered with Innovation Australia (http://www.business.gov.au/Pages/default.aspx) before the tax offset is claimed, and the ATO determines if the expenditure claimed in your tax return for your R&D activities is eligible for the tax offset.

RECENT CHANGES TO THE R&D TAX INCENTIVE (RDTI)

Enhanced reforms to the R&D Tax Incentive were introduced as a part of the 2020-21 Budget, included in Budget Paper 2, JobMaker Plan — Research and Development— Tax  Incentive supporting Australia’s economic recovery.

The changes to the R&D Tax Incentive apply to income years beginning on or after 1 July 2021.

Some administrative elements of the reforms applied from 1 January 2021.

Changes to how you claim the incentives will be included in your company tax return and R&D schedule instructions from 2021/ 22.

The table below compares changes to the R&D Tax incentive that came into effect from 1 January 2021 and 1 July 2021 with the previous features of the program.

Reforms came into effect 1 January 2021

New features Previous feature
ISA determinations
The Board of Innovation and Science Australia (ISA) may also make determinations about the circumstances and how it will exercise its powers or perform its functions or duties concerning the R&D Tax Incentive. These determinations are binding on the Board. No equivalent.

 

Extensions of time
The Board’s ability to grant an extension of time is subject to a cap of three months on the total extension available unless the extension is granted to allow an applicant to wait for the outcome of a separate pending decision. The Board of ISA must grant extensions of time for registrations and the provision of information of up to  14 days if necessary It may grant a longer period       if events outside the applicant’s control impair an applicant’s ability to meet the deadline.

Reforms came into effect from the first income year commencing on or after 1 July 2021, administered by the Australian Tax Office *

New law Previous law  
Expenditure threshold  
The R&D expenditure threshold increased to $150 million. The R&D expenditure threshold applies to eliminate the incentive component of the R&D tax offset in relation to notional deductions in excess of $100 million.  
The R&D expenditure threshold is a permanent feature of the law. The R&D expenditure threshold is legislated to no  longer apply from 1 July 2024.  
R&D Tax Offset for small R&D entities  
R&D entities with aggregated turnover of less than $20 million are generally entitled to an R&D tax offset rate equal to their corporate tax rate plus an 18.5 per cent premium. R&D entities with aggregated turnover of less than $20 million are generally entitled to an R&D tax offset rate of 43.5 per cent.  
R&D Tax Offset for large R&D entities  
R&D entities with aggregated turnover of $20 million or more are entitled to an R&D tax offset equal to their corporate tax rate plus a premium based on the level of their incremental R&D intensity for their R&D expenditure. R&D entities with aggregated turnover of $20 million or more are entitled to a non-refundable  R&D  tax offset at a rate of 38.5 per cent.  
Schemes to obtain an R&D tax benefit  
The Commissioner may also deny a tax benefit in the form of an amount of a refundable or non-refundable R&D tax offset that an R&D entity  seeks to obtain from a tax avoidance scheme. The Commissioner may deny a tax benefit in the form of a deduction or notional deduction that an R&D Entity seeks to obtain from a tax avoidance scheme.  
Uniform claw back rule  
Recoupment amounts and feedstock adjustments give rise to an amount of assessable income equal to the grossed-up value of the incentive component of associated amounts of the R&D tax offset. Recoupment amounts are subject to a standalone tax of 10 per cent.  
One-third of feedstock adjustments are included in an R&D entity’s assessable income.  
An amount is  included in the assessable income of the R&D entity that received or is entitled to the R&D tax offset   in relation to a recoupment amount or feedstock  revenue received by a related entity. In cases involving related entities, the entity receiving recoupment is subject to recoupment tax.  
In cases involving related entities, the R&D entity entitled to the R&D tax offset is subject to a feedstock adjustment if the related entity receives feedstock revenue.  
New law Previous law  
Balancing adjustments for R&D assets  
The R&D entity’s assessable income is increased by  an amount equal to the grossed-up value of the incentive component of the associated amounts of the R&D tax offset. For an R&D asset held only for R&D purposes where the balancing adjustment amount is included in the R&D entity’s assessable income – the amount is generally increased by one third.  
For an R&D asset held partially for R&D purposes where the balancing adjustment amount is included in the R&D entity’s assessable income – the R&D component of the amount is generally increased by one third.  
The R&D entity is entitled to a deduction equal to the grossed-up value of the incentive component of the associated amounts of R&D tax offset that would have  been obtained if the R&D component of the balancing adjustment amount was included in the offset calculation. For an R&D asset held only for R&D purposes where the balancing adjustment amount is allowed as a deduction – the deduction is included in the R&D entity’s R&D tax offset calculation.  
For an R&D asset held partially for R&D purposes where the balancing adjustment amount is allowed as a deduction – the R&D component of the amount is increased by one third or (for small R&D entities) or one half.  
Similar amended rules apply to balancing adjustments for R&D assets held by R&D partnerships. Similar rules apply to balancing adjustments for R&D  assets held by R&D partnerships.  
The transitional rules are amended in line with the primary amendments but continue to apply to R&D assets acquired before the introduction of the R&D Tax Incentive in 2011. Transitional rules apply to R&D assets acquired before the introduction of the R&D Tax Incentive in 2011.  
Transparency of R&D claimants and activities
As soon as practicable after the period of two years following the end of the financial year, the Commissioner must publish information about the R&D entities that have claimed notional deductions for  R&D activities, including the amount claimed. No equivalent.  

 

TAX OFFSET FOR UNINCORPORATED SMALL BUSINESS

For the 2021/22 income year, unincorporated small businesses will benefit from a 16% discount on income tax payable on income from business activity. The discount is capped at $1,000 per individual for each income year and is a tax offset.

SUPERANNUATION OFFSETS

Low Income Superannuation Tax Offset (LISTO)

From 1 July 2017, a superannuation tax offset has been introduced as a means to reduce the tax on superannuation contributions for low-income earners.

This offset will be non-refundable, based on the tax paid on concessional contributions of low-income earners up to a cap of $500.

To be eligible for this, offset members will have to have an adjusted taxable income of less than $37,000 and have made a concessional contribution on their behalf.

 

Increased threshold of low-income spouse tax offset – Super

The eligibility threshold for the low-income spouse tax offset will be increased from $13,800 to $40,000 for the receiving spouse from 1 July 2017.  This offset will provide up to $540 per annum with the expectation of improving the superannuation balances of these low-income spouses. 

INCOME TESTS

Income tests are used to work out your eligibility for a number of tax offsets and benefits, which can reduce the amount of tax you have to pay.

The ATO uses a number of items from your tax return when applying income tests.  You should ensure that you complete all items that apply to you in the income tests section of your return.

A number of offsets, benefits and obligations are assessed using a family income threshold.  If you have a spouse, you should include your spouse’s income in the relevant section of your tax return.

Depending on your circumstances, any of the following tests may be used to assess your entitlements. The ATO uses income tests to assess the following items in your tax return.

 

Tax Offsets

  • Net medical expenses tax offset for disability aids, attendant care, or aged care
  • Invalid and invalid carer tax offset
  • Seniors and pensioners tax offset
  • Medicare levy surcharge (lump sum payment in arrears) tax offset
  • Spouse super contributions tax offset.

Other items

  • Private health insurance rebate
  • Medicare levy surcharge threshold calculation
  • Government super con-contribution
  • A deduction for your personal super contributions
  • A deduction for your business losses (non-commercial losses)
  • Income tax concessions available to participants in certain employee share schemes
  • HELP and SFSS repayments.

Adjusted Taxable Income (ATI)

Your ATI affects your entitlement to any dependant tax offset.

Generally, your adjusted taxable income includes your:

  • Taxable income: (your assessable income minus deductions)
  • Adjusted fringe benefits amount: (total reportable fringe benefits amounts x 0.53)
  • Tax-free government pensions or benefits: (includes disability pensions, carer payments and defence pensions)
  • Target foreign income: (includes any income earned from overseas that is not already included in your taxable income or received in the form of a fringe benefit)
  • Reportable super contributions: (includes both reportable employer super contributions and deductible personal super contributions)
  • Total net investment loss: (includes both net financial investment loss and net rental property loss)
  • Child support you paid.

Rebate income

The ATO will work out what is termed ‘rebate income’ to determine whether you are eligible for the seniors and pensioners tax offset.

Your rebate income includes your:

  • Taxable income: (your assessable income minus deductions)
  • Adjusted fringe benefits amount: (total reportable fringe benefits amounts x 0.53)
  • Total net investment loss: (includes both net financial investment loss and net rental property loss)
  • Reportable super contributions: (includes both reportable employer super contributions and deductible personal super contributions).

Income for Medicare Levy Surcharge purposes

The ATO uses your income for surcharge purposes to determine if you have exceeded the Medicare levy surcharge threshold that applies to you.  They do this to determine:

  • If you are entitled to the private health insurance rebate; and
  • If you do not hold an appropriate level of private health insurance, your liability to pay the Medicare levy surcharge.

Private Health Insurance rebate

To assess your private health insurance (PHI) rebate entitlement, generally, your income for surcharge purposes is your:

  • Taxable income: (your assessable income minus deductions)
  • Reportable fringe benefits amount, as reported on your payment summary
  • Total net investment loss: (includes both net financial investment loss and net rental property loss)
  • Reportable super contributions: (includes both reportable employer super contributions and deductible personal super contributions)
  • The amount on which family trust distribution tax has been paid.

Medicare Levy Surcharge

You may have to pay a Medicare levy surcharge (MLS) if you or your dependants (including your spouse, even if they had their own income) did not have an appropriate level of private patient hospital cover for the whole financial year and your income was above a certain amount.

HELP and SFSS repayment income

Your repayment income includes your:

  • Taxable income: (your assessable income minus deductions)
  • Reportable fringe benefits amount, as reported on your payment summary
  • Total net investment loss: (includes both net financial investment loss and net rental property loss)
  • Reportable super contributions: (includes both reportable employer super contributions and deductible personal super contributions)
  • Any exempt foreign employment income amounts included in a tax return.

Super income tests

Reportable employer super contributions are included in the income tests for the following:

  • Spouse super contributions tax offset
  • Government super co-contribution
  • Deduction for personal super contributions.