“Adjusted Taxable Income” in general is an income formula used as a means test to determine eligibility for a number of tax offsets, concessions and Centrelink benefits.
The income tests are applied by an Adjusted Taxable Income formula which begins with Taxable Income, to which is added (or subtracted) items of adjustment.
The amended income amount is compared to a threshold amount to determine eligibility for a tax concession or relief (e.g. medicare levy) or the application of an additional tax percentage (e.g. medicare levy surcharge).
The purpose of the adjusted income concept is to restrict the benefit of lower taxing measures to those taxpayers who more likely need it, by more accurately measuring income, recognising that ‘taxable income’ might only be part of an individual’s total income package.
Unfortunately there is no single income formula, applicable across a range of tax concessions, as the following example demonstrates.
Is Repayment Income For HELP Loan Purposes The Same As Adjusted Income For Medicare Levy Surcharge Purposes?
The definitions of “repayment income” for HELP loan purposes and “adjusted taxable income” for Medicare Levy Surcharge purposes are similar but not identical.
Both include taxable income and certain additional amounts, but there are some differences in the specific components included in each calculation.
Repayment income for HELP loan purposes
includes:
- Taxable income PLUS:
- Net investment losses
- Reportable fringe benefits
- Reportable superannuation contributions
- Exempt foreign employment income
Adjusted Taxable Income for Medicare Levy Surcharge
includes
- Taxable income PLUS:
- Reportable fringe benefits
- Net investment losses
- Reportable employer superannuation contributions
- Deductible personal superannuation contributions
- Certain tax-free government pensions or benefits
- Income from trusts or partnerships
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 small business tax discount.
Low Income Tax Offset
The eligibility for the low income tax offset is simply based on taxable income with no other adjustment.
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
- taxable income, PLUS
- exempt reportable fringe benefits amounts multiplied by 0.53,
- other non-exempt reportable fringe benefits,
- total net investment losses (net financial investment and rental property losses), and
- reportable super contributions
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:
- taxable income (before any ESS discount)
- reportable fringe benefits
- reportable superannuation contributions
- total net investment losses
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:
- assessable income
- reportable fringe benefits
- reportable employer super contributions
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:
- taxable income
- adjusted fringe benefits (exempt reportable fringe benefits amounts x 0.53 )
- non-exempt reportable fringe benefits
- tax-free pensions or benefits
- target foreign income
- reportable superannuation contributions
- total net investment loss
- LESS deductible child maintenance expenditure
See further: LISTO
Net Medical Expenses Tax Offset
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 (from 2018 onwards)
- 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.
Change to Adjusted Taxable Income Formula in 2017
From 2017, the government adjusted the formula for the inclusion 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.
The value of ‘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.
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:
- taxable income
- adjusted fringe benefits (total reportable fringe benefits amounts x 0.53 )
- target foreign income
- total net investment losses
- tax-free pensions or benefits
- reportable superannuation contributions
- LESS deductible child maintenance expenditure
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:
- income that is mainly a reward for your personal effort or skills less any related deductions
- income from a business that you carry on, less any related deductions
- reportable fringe benefits
- reportable employer superannuation contributions
- assessable farm management repayments
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 2022-06-07