From July 1, 2009, the federal government is planning to put in place changes to the income test applicable to a range of government assistance programs. These changes may be quite significant depending on your circumstances.
The changes will see the following included in certain income tests:
- Voluntary salary sacrifice superannuation contributions.
- Net financial investment losses (negative gearing deductions).
- Adjusted fringe benefits.
Under these proposed changes these amounts will be included in the income test for the:
- Government superannuation co-contribution.
- Pensioner and senior Australians tax offset.
- Mature age worker tax offset.
- Spouse superannuation contributions tax offset.
- Baby bonus.
- Childcare benefit.
- Child support.
- Family tax benefit (FTB) parts A & B
In particular, those using salary sacrifice contributions to provide greater access to these offsets and benefits, may have to revisit this strategy in light of the changes.
Information from the government also suggests that all income stream and lump sum payments from a taxed super fund would be counted as income for the purpose of assessing eligibility for the Commonwealth Seniors Health Card (CSHC) - whether or not the benefit comprises a tax-free component or is otherwise non-assessable.
This would mean that those of age pension age who are accessing their superannuation assets to draw a tax free income stream will be affected by this change. Under current laws, this tax free income stream is not included as part of assessable income for the CSHC income test. Those who use a transition to retirement income stream strategy will be hit twice as from the 1st of July not only will the pension stream be assessed but so will voluntary salary sacrifice contributions into superannuation.
Including the tax free income stream as assessable income along with voluntary salary sacrifice contributions may well tip some self funded retirees, or those who continue to work passed age pension age, over the cut-off threshold and cause them to be ineligible for the CSHC.
If you wanted more information on the proposed changes please refer to the consultation paper found on the Federal Government's Treasury website - http://www.treasury.gov.au/contentitem.asp?NavId=037&ContentID=1438 and the Commonwealth Seniors Health Care Fact Sheet found on the government's Department of Families, Housing, Community Services and Indigenous Affairs website - http://www.facsia.gov.au/internet/facsinternet.nsf/seniors/cshc_changes.htm