What is Adjusted Taxable Income (ATI)

(last updated 25/03/14)

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From 1 July 2009 the ATO started using Adjusted Taxable Income (ATI) to calculate various tax offsets and obligations. Already in use by Centrelink, Family Assistance Office and Child Support Authority, the new measures replace the old Separate Net Income test previously used by the ATO.

The changes do not alter the way assessable income are determined. However, from 1 July 2009, they may change the amount of tax you are liable to pay by impacting the following tax rebates etc:
  • Medicare levy surcharge threshold calculation
  • Medicare levy surcharge (lump sum payment in arrears) tax offset
  • Dependency tax offsets
  • Senior Australians tax offset
  • Pensioner tax offset
  • Mature age worker tax offset
  • Spouse superannuation contributions tax offset
  • Government super co-contribution
  • Deduction for personal superannuation contributions
  • Higher Education Loan Programme and Student Financial Supplement Scheme repayments.
In determining eligibility for these taxation benefits and obligations three new income tests have been developed and several existing income tests have been amended. As part of these changes two new items will be used in determining ATI:
  • Reportable super contributions, and
  • Total net investment losses.
At present, both of these items are ignored in determining entitlement to ATO tax obligations and offsets. While the changes may appear simple and non intrusive, they have the potential for nasty outcomes for many people and will add to the cost of compliance and preparation of annual tax returns. Anyone with negative gearing will almost certainly be affected in some way.

Without getting bogged down with details, formula's and scenarios, property investors with negative gearing may need to review their tax positions during the year, giving consideration to the following:
  • Review pay as you go withholding arrangements to ensure the amount of tax withheld by your employer will cover the amount of tax payable;
  • Review ITWV currently in place to ensure the varied rate is not too low.
Because these measure are so new the ATO is still developing ATI calculation tools for taxpayers and tax agents. So taxpayers should check with their accountant/tax agent for updates.

For more details go to: Changes to Income Tests

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