What is adjusted taxable income and why you might need to know
If you recently have or ever plan to apply for certain tax offsets, concessions or government benefits, the basis for eligibility can be determined based on your “adjusted taxable income” (ATI).
Adjusted taxable income (ATI) is used to assess entitlement eligibility for Centrelink and Child Support Agency benefits, the Family Tax Benefit (both A and B), and the Child Care Benefit. Parental Leave pay and Dad and Partner pay thresholds are based on ATI.
The Low Income Supplement and Low Income Family Supplement – as well as entitlement to the Commonwealth Seniors Health Card – are subject to ATI thresholds. The Medicare Levy Surcharge thresholds, Private Health Insurance rebate, Higher Education Loan Program (HELP) repayments and Dependent (invalid and carer) tax offset are also affected by the ATI.
How the ATI is calculated
ATI is based on your taxable income — your assessable income less allowable deductions — with an array of other adjustments applied.
These applicable adjustments may involve including any of the following:
- reportable employer superannuation contributions
- deductible personal superannuation contributions
- adjusted reportable fringe benefits
- certain tax-free government pensions or benefits received
- 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 – for example, negatively geared losses on shares)
- net rental property loss (the amount by which deductions attributable to rental property exceeded rental property income — that is, negatively geared rental property losses).
Note that while any of the above are added to taxable income, for the purposes of some government payments or services any child support you pay to another person may be deducted from the final ATI. Ask TNR if this is a factor in your circumstances.
Nitty gritty details
Because ATI is affected by many adjustments, there are strategies you can use to ensure continuing eligibility through managing levels of ATI.
The Dependent (invalid and carer) tax offset for example is available for a spouse who is an invalid or who cares for an invalid, but the offset can’t be claimed if your ATI is above $100,000 (for the 2015-16 year) or if your spouse’s ATI is more than $10,634.
You may have some space to reduce yours or your spouse’s ATI through superannuation salary sacrificing arrangements (because reportable employer super contributions are included) but FBT-free benefits including work-related items (phone, laptop, tools of trade) could reduce your ATI as well.
Depending on the entitlement or offset, calculating of the ATI can be tricky and time consuming – speak to TNR for assistance.