Family Tax Allowance after 1/7/2000
Family Tax Allowance after 1/7/2000
Family Tax Allowance BEFORE 1/7/2000 - it came in 2 flavours - A & B
The Family Tax Initiative was introduced with effect from 1 January 1997.
It reflects the view that some injustice was being done to families in which there was only one breadwinner.
(You will be aware that the first , $5400 of taxable income is not taxed - this is referred to as the tax-free threshold).
In a family in which both partners were earning income, there was an effective tax benefit of two tax-free thresholds (one for each partner) as well as government subsidies to professional childcare.
In a family in which one partner derived assessable income, usually through full time, paid employment, and the other provided full time (unpaid) child care, the family received the benefit of only one tax free threshold, and no use was made of government subsidised child care arrangements.
To provide a measure of horizontal equity in such cases, the Family Tax Assistance was provided to increase the tax-free threshold of single income families.
But, to ensure those low-income families, which did not derive sufficient income to attract tax, gained some benefit from this initiative, it was decided to provide the assistance in either of two forms.
through the Social Security system, in the form of cash payments, or
through the tax system, through the adjustment to the tax-free threshold.
Family Tax Payment - the money's in the hand each fortnight
This is a fortnightly payment available to families whose income is low enough for them to get the higher rate of Family Payment. These families will automatically get Family Tax Payment without having to make a claim.
Family Tax Payment is equal to the tax savings from Family Tax Assistance.
or in your tax free limit - the money's in the tax refund cheque at the end of the year
This is tax assistance administered by the Australian Taxation Office. It increases your tax-free threshold. This means that if you have dependent children and earn under the income limit, you will pay less tax. You can choose to have less tax taken out of your pay or reduce your tax through your tax return at the end of the income year.
(But not both)
Did you choose NOT to take it in the hand?
All right: Let's look at the way you can take it through the tax system!
Family Tax Assistance comes in two flavours
There are two parts to Family Tax Assistance. You may be entitled to one or both depending on your family circumstances. Both parts have income tests.
Part A flavour of Family Tax Assistance
Part A is available to families including single parent families with dependent children.
It provides an increase in your tax-free threshold for each dependent child—equivalent to a reduction in tax.
To get Part A of Family Tax Assistance, the combined income of you and your spouse—if you have one—must satisfy a family income test.
Part B flavour of Family Tax Assistance
Part B is available in addition to Part A, but only to families—including single parent families—who have
one main income earner and
at least one dependent child under five years of age.
Part B provides an additional increase in your tax-free threshold for a family—equivalent to a reduction in tax.
To get Part B of Family Tax Assistance, you and your spouse—if you have one—must each satisfy a separate income test.
A taxpayer’s eligibility depends on several factors—
whether the taxpayer meet the criteria to be the claimant, and
whether their child meets the criteria as a dependent child—
by age,
circumstance and
income earned in the relevant income year.
The amount of FTB a taxpayer is eligible for depends on their and their spouse’s income for FTB purposes. These factors are explained below.
To be eligible to claim FTB
a taxpayer must: be an Australian resident (under the Social Security Act) or a special category visa holder residing in Australia, or the holder of a visa approved by the Minister for the purposes of subparagraph 729(2)(f)(v) of the Social Security Act 1991
not reside outside Australia for longer than 3 years
provide care to a dependent child—see below
care for the child for a minimum of 10 per cent of the assessment period, if they share the care of a dependent child with another person who is not their current spouse. That is, if a taxpayer shares the care over a full income year they must have cared for the child for at least 37 nights of that income year.
To be eligible the
dependent child must: be an Australian resident or live with the taxpayer;
not be their spouse of carer;
not reside outside Australia for longer than 3 years;
have an ADJUSTED TAXABLE INCOME of less than the cut-out amount—see below; and
if the child is under 18 either:
be in a taxpayer’s care and the carer must be legally responsible (whether alone or jointly with someone else) for their day-to-day care, welfare and development
be in a taxpayer’s care in accordance with a family law order or registered parenting plan
be in a taxpayer’s care and no-one else has legal responsibility for their day-to-day care, welfare and development
Note
: A stillborn child CANNOT be a dependent child for FTB purposes. A child that is born alive and dies shortly after birth can still be a dependent child.The
child is not a dependent child if they—or someone on their behalf— receive a social security pension or
benefit or a payment under a labour market program.
(If the child is aged 16 or older, in addition to the above they also cannot receive) payments under a prescribed educational scheme.
A taxpayer’s child must have an ATI of less than the limits in the following table in 2000–01 to be a dependent child.
|
Under 5 years |
No limit |
|
5–15 years studying full time |
No limit |
|
5–15 years not studying full time |
$7663 |
|
16–24 years |
$7663 |
Are you eligible? Now let's see if you pass the Adjusted Taxable Income test?
Your family income dictates how much Family Allowance you can receive, but what is family income?
the sum of your adjusted taxable income (ATI)
and your spouse’s adjusted taxable income (ATI) (if you had a spouse). (if things aren't too harmonious - just guess the spouse's income)
So what is Adjusted Taxable Income?
the sum of
taxable income, plus
adjusted fringe benefits, plus
net rental property losses, plus
tax-free pensions or benefits, plus
target foreign income less
50% of child maintenance expenditure.
EXAMPLE
Julie’s FTB claim period covers the full 2000–01 income year and she has 3 dependent children for FTB purposes.
For the first 3 months—July to September—Julie was married to Ben. Julie then separated and remained single until May. In May Julie married Peter, and they are still together.
Julie’s ATI = , $35 000
Ben’s ATI = , $40 000
Peter’s ATI = , $55 000
Julie had 3 different family ATIs during the claim period.
|
July–September , $75 000 |
July to September—Julie was married to Ben Julie’s ATI = , $35 000 + Ben’s ATI = , $40 000 |
|
October–April , $35 000 |
Julie then separated and remained single until May Julie's ATI = , $35 000 |
|
May–June , $90 000 |
In May Julie married Peter, and they are still together. Julie's ATI = , $35 000 + Peter’s ATI = , $55 000 |
So, are you eligible? Let's see if you pass the Adjusted Taxable Income test?
If a taxpayer provided full care for one dependent child under 18 the family ATI must be less than , $76 249.
If they provided full care for one dependent child aged 18 to less than 25 years a taxpayer must have an ATI of less than , $77 356.
For each other dependent child under 18 they provided full care for, add , $6248 and for each other dependent child aged 18 to less than 25 years add , $7355.
Want an easier way? Try this?
Are all your dependent children under 18?
If so your income limit is the amount in blue under the number of children you maintain
|
0 |
0 |
1 (child under 18) |
2(children under 18) |
3(children under 18) |
4(children under 18) |
5(children under 18) |
6(children under 18) |
|
0 |
|
$76 249 |
$82 497 |
$88 746 |
$95 688 |
$102 630 |
$109 572 |
|
1(child 18-25) |
$77 356 |
$83 605 |
$89 853 |
$96 795 |
$103 737 |
$110 679 |
$117 621 |
|
2(children 18-25) |
$84 712 |
$90 960 |
$97 902 |
$104 844 |
$111 786 |
$118 728 |
$125 670 |
|
3(children under 18) |
$92 067 |
$99 009 |
$105 951 |
$112 893 |
$119 835 |
$126 777 |
$133 719 |
|
4(children under 18) |
$100 117 |
$107 059 |
$114 001 |
$120 943 |
$127 885 |
$134 827 |
$141 769 |
|
5(children under 18) |
$108 166 |
$115 108 |
$122 050 |
$128 992 |
$135 934 |
$142 876 |
$149 818 |
|
6(children under 18) |
$116 215 |
$123 157 |
$130 099 |
$137 041 |
$143 983 |
$150 925 |
$157 867 |
Are all your dependent children aged 18 to 25?
If so your income limit is the amount in pink next to the number of children you maintain
Do you have dependent children in both age brackets? (under 18 and 18-25)
Run your finger across from the relevant row to the relevent column - where they intersect, that's you income limit.
If you had more than 6 children in an age group add $6943 for each dependent child under 18 and add $8050 for each other dependent child aged 18 to less than 25 years.
Your income limit may also be increased by the multiple birth allowance if you had full care of triplets or greater aged under 6 years: for triplets add $8444 and for quadruplets or greater add $11 267.
Is your Adjusted Taxable Income less than the upper income limit?
If not, thanks for playing and don't forget to check to see if you qualify for the Part B allowance on the way out.
If you did, get ready to fill in the personal details form - (next topic)
Let's look at Part B
Family Tax Benefit Part B gives extra assistance to single income families including sole parents - particularly families with children under 5 years of age.
Key Changes
From 1 July 2000, Family Tax Benefit Part B replaced:
Basic Parenting Payment;
Guardian Allowance;
Family Tax Payment Part B;
Family Tax Assistance Part B;
Dependent Spouse Rebate (with children); and
Sole Parent Rebate.
For a
single parent there is no income test for Part B.If a
taxpayer had a spouse and a child aged under 5 years the lowest earner’s ATI must be less than , $10 291 and for a child aged 5 to 18 years the taxpayer’s ATI must be less than , $7663 for that taxpayer to receive FTB Part B.
Age of child |
Part B rate |
|
Under 5 years |
$2602.45 |
|
5 to 18 years |
$1814.05 |
If a taxpayer had a spouse there is an income test on the lowest income earner for Part B. There is no income test on the main income earner.
If the lowest earner’s ATI is greater than , $1616 the Part B rate is reduced by 30 cents for every dollar in excess of , $1616.
related topics | apprentice tax practitioner program | tax law