Your Adjusted Taxable Income – What It Is and Why It Might Impact You

This is one of those topics that sound about as interesting as watching grass grow, which is marginally more interesting than watching paint dry. That’s probably a fair assessment.

However, your adjusted taxable income (ATI) can have a significant impact on your financial life when it comes to areas such as child care subsidies, family tax benefits and other income support payments/benefits.

Understandably, there’s a lot of confusion as to what counts as ‘income’ for purposes of calculating these entitlements or obligations. Put simply, they are calculated by reference to the concept known as ‘adjusted taxable income’ (ATI) which takes into account not only your salary, but a range of other factors, in determining the amount of income you are assessed as receiving.

A preliminary word of warning….detailed and authoritative information on ATI is available from Services Australia.

In the meantime, to get you started in your understanding of this concept, here’s a general educational outline of what’s included in ATI:

• Taxable income – your gross income minus allowable deductions; including wages and salaries, income from running a business, investment income, taxable income support payments and any taxable payments you receive from Services Australia and Veterans’ Affairs (DVA) payments.
• Taxable lump sum payments – such as taxable superannuation death benefits, taxable compensation payments, taxable insurance payouts, and some superannuation released early.
• Foreign income – money you get from outside Australia and don’t pay Australian income tax on, including money from foreign business interests, investments, foreign pensions, regular money from relatives and income you earned overseas.
• Tax-exempt foreign income – income from Australia, earned by members of the ADF serving overseas or Australians on overseas projects approved by the Minister for Trade, Tourism, and Investment.
• Total net investment losses – where investment income is less than investment expenses, including negatively geared rental or financial investments.
• Reportable fringe benefits – pre-tax benefits you get from your employer (aka salary sacrifice). These will have been reported on your payment summary at the end of the financial year, or you can request payroll to tell you the expected amount for this financial year.
• Reportable superannuation contributions – personal super contributions that you made via a salary sacrifice arrangement or that you will claim as an income tax deduction when you lodge your tax return.
• Tax-free pensions or benefits – these can include Centrelink payments such as the Disability Support Pension or Carer payment, and non-taxable DVA payments.
• Account-based income stream benefits – may include a deemed amount from an account-based income stream if you or your partner are over 60.

WARNING

This article is only a general introductory guide to the concept of ATI. It must not be treated as personal financial advice. It is not comprehensive and does not cover every individual circumstance that may arise. If you are unsure about your obligations, you should consider talking with the relevant government agency and/or consult Services Australia.

If you make an incomplete declaration, you may incur penalties and be faced with a debt when your payments are recalculated.

So it’s important to get the calculation right the first time.