On Father’s Day the Australian Government started public consultations on its plan to introduce two weeks of paid leave for dads to take time off work to spend with their newborn babies.

From 1 January 2013, the current Paid Parental Leave scheme will be expanded to include a dedicated payment for dads and other partners.  Eligible working dads and other partners will have access to two weeks Dad and Partner Pay at the national minimum wage, which is currently about $590 a week before tax.

The design of Dad and Partner Pay is based closely on the independent expert recommendations of the Productivity Commission.

The new payment will be available to eligible working fathers or partners (including adopting parents and parents in same-sex couples) who share the role of caring for a child born or adopted from 1 January 2013, and who meet the same income test and work test as the current Paid Parental Leave scheme. 

A family may receive Dad and Partner Pay either on its own or in addition to other family payments such as Paid Parental Leave, the Baby Bonus and Family Tax Benefit. The mother or other parent does not have to be accessing the Paid Parental Leave scheme for her partner to be eligible for Dad and Partner Pay.

Dad and Partner Pay will cost the Government a projected $188.5 million over 5 years (2010-11 to 2014-15).

A consultation paper on Dad and Partner Pay has been released to ensure that parents and employers can have their say on the new entitlement. Employer and employee groups, small business groups, family and community groups and individuals are invited to make their comments on the consultation paper. The consultation period finishes on 17 October 2011.

A new data matching initiative between Centrelink and the ATO is expected to claw back millions of dollars from welfare recipients who have debts with the Australian Government.

Beginning on July 1 this year, Centrelink and the ATO will automatically match data on a daily basis as a way of cross-checking former welfare recipients who have a debt with the Commonwealth. 

The new initiative is expected to recover more than $71 million over four years.

Those who are identified as having debts and who haven’t made repayment arrangements with Centrelink may have their tax refunds garnisheed when they lodge their income tax return.

Of course, this is nothing new in itself. More than $27.5 million was recovered from over 43,000 former Centrelink customers’ tax refunds in the 2009/10 financial year through the tax garnishee process.

Apparently this process has been handled manually every year for the past 15 years, involving a significant amount time and people-power. The process will now be automated and, according to Assistant Treasurer, Bill Shorten, will ”result in more people being referred to the tax garnishee process, retrieving more outstanding debt on behalf of taxpayers.”

Mr Shorten said ”The new data matching link is expected to increase the number of former customers identified for this process by an additional 65,000, above current detection levels, over the four years.”

Centrelink is currently writing to over 90,000 people with outstanding debts who aren’t currently receiving a payment from Centrelink or the Family Assistance Office.

To avoid losing a tax refund because of an old debt, people are advised to contact Centrelink to set up a repayment plan. Details on how to do this are in the letter or people can contact Centrelink on 13 6330.

We’re already receiving a few FTB supplement questions this year so it looks like time to update you on the current rates.

FTB Part A and FTB Part B both include a supplement payment. This gets paid after you (and your partner, if you have one) have lodged your tax returns for the income year.

If it turns out that you have been overpaid, the supplement will first be used to help offset any overpayment of Family Tax Benefit or Child Care Benefit.

For the 2010-11 financial year, the following rates apply:

The above table represents the maximum benefit;  your payment may be lower depending on your individual entitlement and circumstances.

You do not need to apply for the supplements. After tax returns are lodged, Family Assistance reconcile your payments for the year and make any necessary adjustments. The supplements are then automatically paid into the same account that you usually receive Family Tax Benefit payments.

If you are not required to lodge a tax return, you should notify Family Assistance as soon possible to avoid delays in receiving a supplement you might be entitled to (you can do this using their online services).

If you usually apply to receive a lump sum of FTB at the end of the financial year, the supplements will be included with your annual payment.

Did you know that only one in five taxpayers who meet the eligibility criteria for the super co-contribution actually make a personal contribution in order to receive the additional government payment.

The super co-contribution is a Government initiative to help low to middle income earners save for their retirement. You can take advantage of the super co-contribution payment by making a personal contribution into your super fund before the end of the financial year. You could receive up to one dollar for every dollar you personally contribute, up to the limit.

For the 2010-11 income year, the maximum entitlement is $1,000. This starts to shade out at $31,920 and cuts off completely once your income exceeds $61,920. The current income thresholds are reproduced below. 

If you are eligible, when you lodge your tax return, the ATO will calculate the amount of co-contribution you are entitled to and pay it into your fund. The minimum super co-contribution payment is $20.

A lot of our clients have received an unexpected additional tax refund as a result of the ATO amending tax returns of eligible Youth Allowance recipients to include a deduction for study expenses. This came about thanks to the High Court decision in  Commissioner of Taxation v. Anstis.

In the same way that the ATO did this for Youth Allowance recipients, they are now amending the tax returns of eligible Austudy and Abstudy clients. Tax assessments for the 2007, 2008, 2009 and 2010 income tax years will be amended to include a tax deduction of $550 for study expenses for each year of eligibility.

Deductions can be claimed for the 2011 year for study expenses incurred by Austudy, ABSTUDY and Youth allowance recipients.

Keep in mind that this is likely to be the last time you can claim a deduction against an assistance payment. The government announced its intention in the recent Budget to change the law to prevent deductions being claimed against all government assistance payments from 1 July 2011.

Australians receiving government financial assistance will no longer need to worry that additional superannuation contributions, prescribed by law or the rules of their super fund, will be considered when determining their eligibility to receive that financial assistance.

The Assistant Treasurer and Minister for Financial Services and Superannuation, Bill Shorten, today introduced into Parliament an amendment to the definition of reportable employer superannuation contributions (RESC).

“Basically, if a working Australian who is receiving government financial assistance gets additional superannuation contributions they have no control over or cannot influence, because the amount of contribution is prescribed in law or the rules of their super fund, then that superannuation will no longer be considered as reportable employer superannuation contributions, so it won’t be considered income when determining their eligibility for financial assistance,” Mr Shorten said.

“It means we’re not penalising people who are saving for their retirement through superannuation but who still require assistance. This gives effect to the Government’s original intention that RESC should only be those contributions that employees can control, such as salary sacrifice-like arrangements.”

The amendment will apply retrospectively back to July 2009 when RESC was first legislated. RESC are generally superannuation contributions made under formal salary sacrifice arrangements, but include other contributions an employee can influence.

Examples of additional superannuation contributions that will no longer be considered RESC include:

• Contributions required to be made under an enterprise agreement if the employee makes a post-tax contribution (‘matched’ contributions)
• Contributions required by legislation.

The Government is also considering wider issues concerning the RESC definition.

“These things are important to get right. In addition to introducing this amendment today, to provide clarity for those affected, we will have a further process to determine what, if any, additional refinements may be needed,” Mr Shorten said.

I was met with a mix of both scepticism and delight this week as I contact taxpayers who have received an unexpected, addition tax refund as a result of the Anstis case. (Let’s face it, it’s not often I call people to say “Hey, the Tax Office have sent us money for you although you weren’t expecting it”).

The case received a fair amount of coverage at the time. Essentially, the High Court decided that the taxpayer was permitted to claim education expenses against their Youth Allowance income. As a result, the ATO have been amending eligible taxpayers assessments with a standard additional $550 deduction for each of the 2007 – 2010 years they were eligible.   

This has been a positive for many of our client base who’s refund payments are starting to flow through now

Don’t get used to it, though. According to budget papers, the Government will amend the tax law to prevent deductions being claimed against all government assistance payments, with effect from 1 July 2011, in response to the 2010 High Court decision in Commissioner of Taxation v Anstis.

Commencing the measure from 1 July 2011 will allow individuals who receive Youth Allowance (Student) to claim a deduction for expenses incurred in gaining their payment for the 2010/11 income year. This is to ensure individuals who have maintained records of their expenditure following the High Court decision are not precluded from claiming a deduction.

Legislation introduced into Parliament today will support older Australians on the age pension to stay connected to the workforce through a new, more generous Work Bonus.

The new Work Bonus is set to commence on 1 July this year and will encourage older Australians to continue contributing their skills and knowledge by remaining in the workforce.

Under the new rules age pensioners will be able to earn up to $250 a fortnight without it being assessed as income under the income test.

Pensioners will also be able to build up any unused amount of their $250 fortnightly bonus in an ‘income bank’ to a total of $6,500.

The ‘income bank’ can be used to exempt future earnings from the pension income test, so that a pensioner could earn up to $6,500 a year extra without it affecting their pension. This could be from regular work each fortnight or, for example, over a six week period before Christmas.

Any unused amount of the income bank can be carried forward across years.

How does this work in a practical sense? Let’s look at the case studies provided by the Governemnt:  

Case studies

Bob is an age pensioner working as a school crossing supervisor earning $300 a fortnight. Under current rules, half his employment income is disregarded ($150) by the Work Bonus so only $150 is assessed as income under the pension income test. Under the new Work Bonus, $250 will be disregarded, and only $50 assessed, so Bob will have $100 less income a fortnight counted under the pension income test.

Bob’s pension will increase by $50 a fortnight due to a lower amount of income being assessed under the pension income test.

Maria is an age pensioner who only works for six weeks a year as an accountant at tax time. During the six week tax season she earns $1,500 a fortnight, earning a total of $4,500. As Maria does not work at all in the year between tax seasons, after 12 months under the new Work Bonus she will have accumulated $5,750 (23 fortnights x $250) of Bonus in her ‘income bank’. Therefore during the tax season, the $4,500 she has earned can be offset and will not affect her pension.

Maria will continue to receive the maximum rate of pension as she has no income that is assessed under the pension income test, despite earning $4,500 in the six week period. In addition, Maria would retain $2,000 in her ‘income bank’ to offset future employment earnings.

The new Work Bonus will cost $90 million over four years to deliver.

Clearly it’s a positive for many senior Australians who have more incentive to work if they choose to.  This, in turn, allows business access to the skills of older workers. Given the feedback from many older jobseekers this last year, I have to wonder if business will be keen to tap into the valuable resource our older workers are?  

What do you think? Should senior Australians be encouraged to continue working? Are employers less likely to hire older workers, despite their experience? Why do you think that is?  

Acting Attorney-General Brendan O’Connor and Minister for Human Services Tanya Plibersek today encouraged the thousands of residents significantly affected by some of the worst flooding in Queensland’s history to lodge a claim for the Australian Government’s Disaster Recovery Payment (AGDRP).

Mr O’Connor said the payment of $1000 for each eligible adult and $400 for each eligible child is designed to assist people who were forced to leave their homes, have lost their homes or whose homes have sustained major damage as a result of the floods.

“The floods crisis in Queensland is easing in some areas, but worsening in others,” Mr O’Connor said.

“The Australian Government’s Disaster Recovery Payment is available for communities across all 41 Local Government Areas in Queensland that have been declared natural disaster zones.

“In addition, there are a range of other payments and grants available for businesses, primary producers and residents to help them get back on their feet.”  

“More than 100 claims have been approved so far and we’re expecting the first payments to be made to flood victims today,” she said.

“Hundreds more claims are currently being processed and I strongly encourage people affected by the floods to contact Centrelink as soon as possible to check if they are eligible for assistance.

“People can call the Australian Government’s Emergency Assistance Hotline on 180 2266, between 8am-8pm Queensland time, visit their local Centrelink or Medicare Office or speak with Centrelink staff at their local Community Recovery Centre.

In addition to the AGDRP, other joint Commonwealth/Queensland assistance available includes:

• NDRRA Personal Hardship and distress assistance (available across ten LGAs: Central Highlands, Southern Downs, Western Downs, Lockyer Valley, Banana, Barcaldine, North Burnett, Mackay, Bundaberg and Toowoomba):
• Personal Hardship Assistance Grants – A grant of $170 per person, up to a maximum of $780 for a family of five or more is available. This grant is available to people experiencing hardship due to the disaster who require assistance to meet their basic needs.
• Essential Household Contents Grants – Assistance of up to $1660 for individuals and $4980 for families.
• Structural Assistance Grants – Assistance of up to $10 250 for individuals and $13 800 for families may be provided for property owners whose home has been damaged.

Assistance available for businesses and primary producers includes:

• Grants of up to $25,000 for small businesses and primary producers for clean up and recovery (available now across 13 Local Government Areas including Banana, Barcaldine, Bundaberg, Central Highlands, Cherbourg, Lockyer Valley, North Burnett, Scenic Rim, Somerset, South Burnett, Southern Downs, Western Downs, and Woorabinda).
• Concessional interest rate loans of up to $250,000 for small business operators and primary producers, as well as freight subsidies of up to $5,000 (available across 23 Local Government Areas: Balonne, Banana, Barcaldine, Blackall-Tambo, Bundaberg, Central Highlands, Cherbourg, Gladstone, Goondiwindi, Isaac, Lockyer Valley, Longreach, Maranoa, Murweh, North Burnett, Rockhampton, Scenic Rim, Somerset, South Burnett, Southern Downs, Toowoomba, Woorabinda and Western Downs).

For more information about assistance:

Individuals should phone the Australian Government’s Emergency Assistance Hotline on 180 2266 or the QLD Dept of Community Services on 1800 173 349.

Primary Producers should call The Queensland Rural Adjustment Authority 1800 623 946.

More information on Australian Government assistance is available at the Disaster Assist website www.disasterassist.gov.au or via the Centrelink website www.centrelink.gov.au.

I took a large number of calls last week sorting out confusion surrounding what people like to call “bonus” payments. I’m referring to the Family Tax Benefit Part A and Part B Supplements. 

How much is it?

For the 2009-10 year, the maximum payments are $711.75 per child (part A) and $346.75 (part B).

How Do I Get it?

Generally, if you receive Family Tax Benefit, the supplement you are entitled to is paid automatically after you and partner have lodged your income tax returns. If you do not have to lodge a return, simply let the Family Assistance Office know.

What if I have a debt?

Once your tax returns are in, Family Assistance balances your account for the year. If you have been underpaid (ie. you overestimated your income) you should receive the supplements along with any ‘top-up’ payment you are entitled to. If you have been paid too much FTB throughout the year (ie. you have underestimated your household income), the supplement will be applied against your debt.

The best source of information for you regarding your FTB supplements is the Family Assistance Office. While your local accounting practice might be able to provide you with generic info (as above), we cannot give specifics regarding your personal supplement payment date or amount, etc.

 One of the most common Centrelink questions I receive this time of year has to do with the Carer Supplement payments…

who qualifies for it, how much will it be and when is it paid?

$600 Carer Supplement

From today,  more than 500,000 carers across Australia will receive a $600 Carer Supplement, as part of the Australian Government’s Secure and Sustainable Pension Reform.

The annual $600 Supplement will be paid to people who receive:

• Carer Payment;
• both Wife Pension and Carer Allowance;
• both Department of Veterans’ Affairs Partner Service Pension and Carer Allowance; and
• Department of Veterans’ Affairs Carer Service pension.

The payment will also be provided to recipients of Carer Allowance for each person they care for.

This means that if a person is in receipt of Carer Allowance and Carer Payment (or Wife Pension, Department of Veterans’ Affairs Service Pension or Carer Service pension) they will qualify for two Carer Supplement payments, with an additional payment for each extra person they care for.

Most Carer Supplement payments will be paid between Thursday 1 July and Wednesday 14 July.

$1,000 Child Disability Assistance Payment

Around 135,000 carers who receive Carer Allowance (child) will also be paid the annual $1000 Child Disability Assistance Payment from 1 July for each child they care for.

From 1 July, pensioners can receive advance payments of up to a maximum amount of $1,005.75 for singles and $758.10 for each member of a couple in a six month period. This is a significant increase on the previous maximum advance of $500 a year for singles and each member of a couple. 

Part-rate pensioners will also have access to increased advance payment amounts, depending on the amount of pension they receive.

For the first time, pensioners can receive multiple advance payments each year up to the maximum rate, compared to only one advance payment under the old system.

This means that pensioners now have more financial flexibility to deal with unforeseen circumstances, such as replacing a broken refrigerator or buying new tyres for their car. 

The improved advance payments will be available to Age Pensioners, Disability Support Pensioners, and people receiving carers, wife and veterans’ pensions. The advance payments will be repaid from subsequent pension payments.

The advance payments will increase in line with adult pension rate increases in March and September each year.

In addition, pensioners can now choose to receive around half of the new Pension Supplement on a quarterly basis.

The first quarterly Pension Supplement payment will be available from 20 September this year.

As you’re  probably aware, there have been some changes to income tests which affect your eligibility to certain tax rebates and government benefits. We now have to get used to terms like ‘adjusted taxable income’, ‘rebate income’ and  ‘income for surcharge purposes’.

But wait, there’s more…  the income tests for HELP amd SFSS repayments, Mature Age Worker Tax Offset , etc have been amended to include new items such as  ’reportable super contributions’ and ‘total net investment losses’. 

I have had a few recent queries regarding this and so I’ve put up a summary of the new income tests and what on earth they actually mean on the  main site. 

I have to say it… in what universe is this simplifying the tax system for the average taxpayer? I actually love this stuff and thinking about it is giving me a headache!

We are seeing more and more people lately who have found themselves cut off from household Centrelink payments until  they or their partner lodge overdue tax returns.

If you receive Family Tax Benefit and you or your partner have outstanding returns for any year you were receiving FTB, don’t wait until your payments are stopped and you’re unable to meet the bills before doing something about it.

It may be that you were not required to lodge a return for the outstanding year/s. If this is the case, you can simply call Centrelink on 13 6150 or notify them via online services that you do not need to lodge. If you are unsure whether or not you need to lodge a return, a quick call to your accountant should clarify things for you. 

From the start of the next financial year (1 July 2010) if you or your partner have 3 or more outstanding tax returns for the years 2000-2008, your FTB will just be cancelled. Unfortunately, if this happens you may not be able to take advantage of the Education Tax Rebate. Worse yet, you’ll face the rigmarole of having to lodge a new claim for Family Tax Benefit.

You won’t be able to use eTax for overdue returns, but if you are more of the DIY type, you can contact the ATO and have them post paper tax returns out to you for the years you need. Alternatively, most tax agents offer a fee from refund facility if you’re short on cash and have to lodge in a hurry. The main thing is to not ignore it – it won’t go away and neglecting the issue simply compounds the problem. 

Apparently the Government have finally reached agreement regarding the passage of the Youth Allowance bill in the Senate (I posted a bit about this way back in July when it was first announced). This should see more than 150,000 students start to receive new scholarships from April 1st. It’s worth noting that a few changed have been made to the bill since I first post about it, including a small descrease in start-up scholarship amounts).

Key changes to Youth Allowance:

It’s estimated that more than 100,000 students will be better off under the changes by receiving more Youth Allowance or Youth Allowance for the first time. New parental income test arrangements will come into force from July 1. I’ll post more on this once I’ve had a chance to look further into it.

As the economy recovers from the global economic crisis, rates of return on investments are also beginning to increase.

As a result, the deeming rates, which are used to assess income from a range of financial investments held by pensioners and other income support recipients, will also increase on 20 March from the record low levels during the global economic crisis.

The lower deeming rate will increase from two per cent to three per cent for financial investments up to $42,000 for single pensioners or $70,000 for a couple.

The deeming rate will increase from three per cent to four and a half per cent for balances over these amounts.

Age pensioners, on average, hold around $46,000 of deemed financial assets such as cash, term deposits, shares and managed funds.

The deeming system, introduced in the early 1990s, sets a rate of return that pensioners can reasonably be expected to achieve on their financial investments. The deemed income calculated from a pensioner’s financial investments is used for the pension income test, rather than the actual income. This helps provide certainty to pensioners week to week.

Pensioners with financial investments that attract higher returns than the deeming rates will still only have their income assessed at the deeming rates. Any additional income from the financial investments are not assessed. Cash term deposit interest rates available at the major banks are now around six per cent per annum.

A regular revaluation of all shares and managed investments held by pensioners will also be undertaken by Centrelink on 20 March 2010. This occurs automatically every six months, and pensioners can also request an individual revaluation at any time.

Payments affected by the deeming rates include means tested payments, such as the Age Pension, Disability Support Pension, Carer Payment, Parenting Payment and Newstart.

Full details of all rates and thresholds to be indexed on 20 March are available on Minister Macklin’s website.

Approx. 4 million Australians will receive an increase in their pensions and other income support payments from 20 March due to indexation.

Pension payments will increase by $29.20 a fortnight for singles on the maximum rate, and $44.00 a fortnight for couples combined on the maximum rate.

Following these increases, total pension payments for those on the maximum rate, including the base rate and pension supplement, will be:

• $701.10 a fortnight for singles, and
• $1,057.00 a fortnight for couples combined.

According to a media release yesterday from the Minister for Families,  these new rates represent an increase of around $100 per fortnight for singles and around $74 a fortnight for couples combined in pension payments, as a result of the Government’s pension increases in September and indexation.

Pensions are indexed twice a year to the highest increase of three measures: the consumer price index (CPI), the pensioner living cost index, and growth in male total average weekly earnings (MTAWE).
The Government’s Pension Reforms increased the effective benchmark for singles from 25 per cent to 27.7 per cent of MTAWE.

People eligible for the Age Pension, Disability Support Pension (adult rate), Carer Payment, veteran income support payments, Wife Pension, Widow B Pension and Bereavement Allowance will all benefit from the increases.

Parenting Payment will also increase on 20 March, by $26.80 a fortnight for singles.

Adult rates of allowances, such as Newstart, and supplementary payments are also indexed on 20 March each year to the CPI increase for the previous six months. Allowance rates for single people (21 or over, without children) will increase by $6.80 a fortnight.

Rent assistance will also increase.

These increases in payments will be accompanied by an increase in the income and assets cut out amounts. This will see an increase in the amount of income, from for example employment or investments, or the total value of assets, a person can have before their benefit is cancelled.

From today, around 273,000 families will receive a letter from Centrelink to explain new requirements for Family Tax Benefit Part A for children aged 16 to 20.

Legislation passed by the Parliament last week will make participation in education or training a requirement for payment of Family Tax Benefits for young people aged 16 and over. 

From January 2010, a child aged 16 to 20 will have to be studying towards Year 12 or equivalent qualification, or have completed such a course, to be eligible for Family Tax Benefit Part A.

These letters aim to give young people not in full-time study, time to enrol in an approved course of education.

The course must assist or allow the young person to complete a Year 12 or equivalent qualification, considered to be a Certificate Level II course under the Australian Qualifications Framework.

Exemptions will apply when the young person lacks the capacity to study due to illness or impairment, where there is no locally accessible course, or if other special circumstances exist.

Families will receive another letter in March 2010 requesting they provide Centrelink with details of their child’s educational status to establish whether the child is meeting the new eligibility requirement.

If their 16-20 year old child already has a Year 12 or equivalent qualification, or is enrolled in an approved course, then they will be considered to have met the requirement.

Family tax benefit Part A for young people aged over 21, and family tax benefit part B for young people aged 16 to 18, already have a full-time study requirement.

If you did not receive a payment as part of the Economic Security Strategy (ESS) in December 2008 or the Household Stimulus Package (HSP) in March to April 2009, you may be eligible for payments under administrative schemes announced by the Government.

Eligibility has been extended to include around 2,000 families and carers in respect of 3,700 children who did not receive payments due to change in care arrangements.

The categories for eligibility would seem to fall generally under the headings of ”special circumstances”, “foster carers” and “non-parent carers”. For the details of each of these, head over to Centrelink’s ESS Administrative Scheme Q&A page or the HSP Administrative Scheme Q&A page.

Unlike the previous payments, you do need to lodge a claim for a payment under the admin schemes. Claim forms will be available from early December. Be aware that the deadline for lodging a claim is 29 January 2010.