Adjusted Taxable Income

Adjusted Taxable Income” is an income formula used as a means test to determine eligibility for a number of tax offsets calculations, concessions and Centrelink benefits.

As the name suggests, the Adjusted Taxable Income formula begins with Taxable Income, to which is added (or subtracted) items of adjustment.  The amended income figure becomes the basis of entitlement to a tax concession.

Adjusted Taxable Income has a specific meaning (i.e. formula). Other formulations of income used for similar purposes, including income for Medicare levy surcharge purposes and rebatable income, are also detailed below.

ATI Formula Change 2017Small Business Tax DiscountLow Income Tax Offset
Medicare Levy SurchargeNon-commercial lossesSAPTO Rebate Income
Employee Share SchemesHECS-HELP etcSuperannuation Co-contribution
Low Income Super Tax OffsetLow Income Super Contribution (to 2017)Mature Age Workers Tax Offset (to 2014)
Net Medical Expenses Tax OffsetPrivate health insurance rebateHigher Earners Super Contributions Tax
Adjusted taxable income (ATI)Adjusted Taxable Income 2013, 2014Spouse Super Contributions Offset

Change to Adjusted Taxable Income Formula in 2017

The government has adjusted the formula for the inclusion of the value of fringe benefits in Adjusted Taxable Income.

The meaning of ‘adjusted fringe benefits total’ is modified so that the gross value rather than adjusted net value (previously 51%) of reportable fringe benefits is used, except for PBIs, hospitals and charities.

‘adjusted fringe benefits total’ is a component of Adjusted Taxable Income

This affects eligibility for:

  • family tax benefits, stillborn baby payment, child care benefit, Youth Allowance, Abstudy and Isolated Children’s Allowance
  • parental leave pay and dad and partner pay
  • low income superannuation contribution payment
  • net medical expenses offset
  • dependant (invalid and carer) (DICTO) tax offset
  • Notional dependent’s offset for the Zone & overseas personnel tax offsets

For details of the amending legislation see Budget Savings (Omnibus) Act 2016 (Schedule 15). The measures received royal assent on 16 September 2016 and according to its terms therefore take effect from 1 January 2017 for family assistance payments and for income tax tests from 1 July 2017.

Income for medicare levy surcharge purposes

and for Private Health Insurance Rebate entitlement purposes

“Income” includes

the addition of:

  • taxable income including the net amount on which family trust distribution tax has been paid
  • total reportable fringe benefits, as reported on the 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)

Less: the taxed element of a superannuation lump sum, other than a death benefit, which is below the low rate cap.

If you exceed the threshold, this means you are liable to pay the Medicare levy surcharge, but the total is not used to calculate how much surcharge you pay. The surcharge payable is based on the total of taxable income (including the net amount on which family trust distribution tax has been paid) and total reportable fringe benefits amounts.

Small Business Tax Discount

The Small Business Tax Discount eligibility is based based on the proportion of income tax attributable to the total net small business income received by an individual.  Net small business income is (broadly) assessable business income less attributable deductions. See more here.

Low Income Tax Offset

The eligibility for the low income tax offset is simply based on taxable income.

Non-commercial losses: income requirement

To be able to offset a business loss against other income, there are both income and business activity requirements. For detailed information see Non-commercial losses

Rebate income – SAPTO

See Seniors and Pensioners Tax Offset

Employee share schemes income test

The income test for eligibility for the taxed-upfront scheme tax free $1,000 income reduction requires an adjusted income of less than $180,000.

Adjusted income is the sum of:

See further: Employee Share Schemes

HECS-HELP Repayment income

The income amount on which the HELP repayment percentage is determined is calculated as the sum of:

  • taxable income
  • reportable fringe benefits amount as per employment payment summary(-ies)
  • total net investment loss (includes both net financial investment loss and net rental property loss)
  • reportable super contributions – both employer (not super guarantee) and deductible personal contributions
  • any exempt foreign employment income amounts included in a tax return.

This repayment income formula applies for the purposes of HELP, SSL, ABSTUDY SSL, TSL and SFSS.

See HECS-HELP

Personal super and co-contribution total income

Total income for the purposes of determining super co-contribution eligibility is the sum of:

This income calculation is referred to in claims for the spouse super contributions tax offset, low income government co-contribution.

Low Income Superannuation Tax Offset (“LISTO”) – Adjusted taxable income

The LISTO benefit is for those with adjusted taxable incomes below $37,000 and is calculated as 15% of eligible concessional contributions.

Adjusted Taxable Income is the sum of:

See further: LISTO

Low Income Superannuation Contribution (LISC) – Adjusted taxable income

The LISC benefit is for those with adjusted taxable incomes below $37,000 and is calculated as 15% of eligible contributions.

Adjusted taxable income is the sum of:

Note: LISC ceased as of 30 June 2017 and was replaced with LISTO.

See further: LISC

Mature Age Workers Tax Offset – net income from working

Net income from working is used in the eligibility test for MAWTO. Note that from after 30 June 2014, MAWTO is no longer available.

‘Net income from working’ is the sum of:

Net Medical Expenses Tax Offset

See Adjusted Taxable Income

Net Medical Expenses Tax Offset eligibility conditions are here.

Private health insurance rebate income test

For the Private health insurance rebate income test – see above – Income for Medicare levy surcharge purposes.

Higher income earners increased super contributions tax

Higher income earners increased contributions tax – applies to the excess over $250,000 ($300,000 up to 1 July 2017) of the income for Medicare levy surcharge purposes (other than reportable super contributions) Plus the low tax (i.e. 15% rate) contributions

 

Adjusted taxable income (ATI)

Adjusted Taxable Income is used as the basis of assessment for a number of concessions and Centrelink entitlements.

The following amounts are used to calculate a person’s ATI.

Addition of:

  • taxable income
  • reportable employer superannuation contributions (includes deductible personal superannuation contributions)
  • exempt reportable fringe benefits amounts multiplied by 0.53 (2018)
  • non-exempt reportable fringe benefits
  • certain tax-free government pensions or benefits received by the person (e.g. disability, carers, defence)
  • target foreign income (income and certain other amounts from sources outside Australia (unless already included as income or a fringe benefit)
  • net financial investment loss (the amount by which the person’s deductions attributable to financial investments exceeded their total financial investment income)
  • net rental property loss (the amount by which the person’s deductions attributable to rental property exceeded their rental property income)

Less:

  • any child support payments the person provided to another person.

Adjusted taxable income – 2012-13 and 2013-14

The following amounts are used to calculate a person’s ATI:

Addition of:

  • taxable income
  • reportable employer superannuation contributions
  • deductible personal superannuation contributions
  • adjusted fringe benefits (total reportable fringe benefits amounts multiplied by 0.535)
  • certain tax-free government pensions or benefits received by the person
  • target foreign income (income and certain other amounts from sources outside Australia not included in your taxable income or received as a fringe benefit)
  • net financial investment loss (the amount by which the person’s deductions attributable to financial investments exceeded their total financial investment income)
  • net rental property loss (the amount by which the person’s deductions attributable to rental property exceeded their rental property income)

Less:

  • any child support payments the person provided to another person.

 

See further:

.

This page was last modified 2018-12-20