Carer Allowance (CA) income test – determining reference tax year and assessable income components 009-18082301

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Carer Allowance

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Australian Taxation Office (ATO) - Offsets and rebates

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Seniors and Carers Programme - Carer Resources

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Carer Allowance adjusted taxable income details (SA489)

Details of income stream product form (SA330)

Information you need to know about your claim for Carer Payment and Carer Allowance

Taxable income for CA income test purposes

This list contains examples of taxable income for CA income test purposes.

Taxable payments and components
certain Department of Veterans' Affairs (DVA) payments including Defence Force Income Support Allowance (DFISA) and DVA payments that are not treated as tax-free pensions and benefits (for example, invalidity and service pensions paid to those who have reached Age Pension age, are taxable)
wages
earnings from a business
capital gains (profit from the sale of assets)
reportable fringe benefits (not adjusted rate)
compensation payments
Parental Leave Pay (PPL)
foreign income that is taxable in Australia
income from real estate
interest on savings and investments
superannuation withdrawals (if a person rolls over their superannuation in full to another superannuation fund or it is accessed under the First Home Super Saver (FHSS) Scheme, the superannuation withdrawal is not taxable income)
scholarship income (if the scholarship is taxable)
termination payments from employers (an amount rolled over into a superannuation fund is not taxable income)
withdrawals from the Farm Management Deposits (FMD) Scheme

Examples of financial investments

Table 1: This table provides examples of what is and is not a financial investment.

Item	Description
1	Financial investments Investments commonly reported by Carer Allowance (CA) customers include: dividends from Australian company shares dividends from foreign shares managed investment schemes cash management trusts property trusts Australian equity (share) trusts international equity trusts film schemes timeshare schemes mortgage schemes actively managed strata title schemes forestry managed investment schemes rights or options from any of the above investments, and distributions from a partnership (but not a trust) that includes the above financial investments
2	Net investment losses from managed investment schemes For the purpose of Net investment losses, the following are not managed investment schemes: regulated super funds approved deposit funds debentures issued by a body corporate barter schemes franchises direct purchases of shares and other equities schemes operated by an Australian bank in the ordinary course of banking business such as a term deposit The Australian Taxation Office (ATO) allows individuals to claim a deduction from their taxable income for net investment losses from shares or investments in managed investment schemes. The ATO specifies that certain investment types are not managed investment schemes for the purpose of claiming a deduction.
3	Deductions Deductions in respect of a financial investment may be claimed for expenses such as: the costs of borrowing to invest in the financial investment managed fees charged on the investment financial investment advice Rental property and financial investment losses are calculated separately and the income made from a rental property cannot be offset against any losses from the financial investments, and vice versa. It is important to note that all deductions allowed by the Australian Taxation Office (ATO) for the purpose of Net investment losses are allowed as deductions for the purpose of the Carer Allowance income test. The reason these losses are separately identified is so they can be added back to the carer's or their partner's taxable income. Partnership or trust losses declared on an individual's income tax return are not added back for the Carer Allowance income test. Carers should not include these as Net investment losses.

Calculation of investment income and capital gain/loss

Table 2: This table provides an example showing how to calculate investment income and capitals gains/losses.

Item

Description

Investment property

Tom bought an investment unit for $400 000. The property was negatively-geared. That is, the interest on the mortgage Tom took out to buy the property ($20 000 per annum) exceeded the rental income ($15 600 per annum). In addition to the mortgage payments, Tom also had to pay $4000 per annum in other expenses (rates, management fees and body corporate).

Sometime later, Tom was retrenched and was forced to sell the property for $350,000 because he couldn't keep up with the mortgage payments.

Net rental property income

What was Tom's net rental property income?

Total income less costs = profit/loss.

$15 600 - ($20 000 + $4000) = -$8400.

Tom's net rental property income is a loss of $8400.

Capital gain/loss

What was Tom's capital gain/loss?

Purchase price - sale price = capital gain/loss.

$400 000 - $350 000 = $50 000.

Tom's capital loss is $50 000. For Carer Allowance (CA) purposes, a capital gain or loss is a component of taxable income. This means Tom's capital loss is not shown separately to his taxable income.

Investment in shares

Tom borrowed $150,000 to invest in shares. The interest on Tom's loan was $10,500 per annum. Tom's shares paid dividend income of $6000. The difficult economic conditions that had caused Tom's retrenchment had also caused share prices to tumble. Tom was forced to sell his shares at a loss. They sold for a total of $135 000.

Net financial investment income

What was Tom's net financial investment income?

Total income less costs = profit/loss.

$6000 - $10 500 = $4500.

Tom's net financial investment income is a loss of $4,500.

Capital gain/loss

What was Tom's capital gain/loss?

Purchase price less sale price = capital gain/loss.

$150 000 - $135 000 = -$15,000.

Tom's capital loss is $15,000. For CA purposes, a capital gain or loss is a component of taxable income. This means Tom's capital loss is not shown separately to his taxable income.

Target foreign income

This list contains examples of situations where people may receive target foreign income:

Australian residents for tax purposes who are employed outside Australia and whose foreign income is not taxable in Australia, for example, foreign-based airline pilots or United Nations (UN) employees
Australian residents for tax purposes who receive income from foreign business interests which are exempt from Australian tax
Non-residents for tax purposes who are partnered to Australian residents, working in Australia for overseas organisations
People who regularly receive gifts or allowances from a foreign source. This can include money or gifts regularly received from family members who are living outside Australia
People who receive a foreign pension/income that is exempt for income support payments under subsections 8(1), 8(4), 8(5) and 8(8) of the Social Security Act. Examples of these payments include the Holocaust Survivor Pension and German Restitution Payments

Employer provided fringe benefits

This list contains examples of assessable employer provided fringe benefits, and examples of benefits that are exempt.

Examples of assessable employer provided fringe benefits:

personal use of a car
school fees, private health insurance and low interest loans
housing assistance
financial investment and expense benefits

Examples of benefits that are exempt:

Examples of exempt benefits are:

A car benefit is exempt if:

it is not classified under Social Security Act section 1157C, or
if the vehicle is a taxi, panel van or utility truck, or any other road vehicle designed to carry less than one tonne (other than a vehicle designed for the principal purpose of carrying passengers), and
the only private use of the vehicle is for work related travel and other minor, infrequent and irregular private use, or
the vehicle is unregistered

A loan is exempt if:

the interest rate applied to it equals, or is greater than, the applicable notional interest rate, or
it is a housing loan to a member of the Defence Force made by the Defence Force or its agent

Mortgage payments paid by the Defence Force or an agent for the Defence Force to Defence Force members are exempt.

Employee discounts are not an assessable expense benefit.

Reportable superannuation contributions

Table 3

Item	<Description>
1	Reportable employer superannuation contributions Tim works for ABC Pty Ltd. Under the superannuation guarantee, ABC pays 9 per cent of Tim's ordinary time earnings into a superannuation fund of Tim's choice. Under ABC's industrial agreement, employees are able to have additional amounts of their salary paid to superannuation. Tim decided to contribute a further $5,000 to his superannuation fund under a salary sacrifice agreement. This $5,000 is a reportable employer superannuation contribution.
2	Personal deductible superannuation contributions for a self-employed person Susan runs a small retail business. During the year Susan makes contributions to a superannuation fund. When Susan prepares the tax return at the end of the financial year, a deduction for these superannuation contributions can be claimed. Such contributions are called personal deductible contributions.
3	Personal deductible superannuation contributions as an employee From 1 July 2017, Sally can claim a deduction from her taxable income for personal deductible superannuation contributions to her superannuation fund provided she has not exceeded the Concessional Contributions Cap of $25,000 for that year.

Tax-free pensions or benefits for the Carer Allowance (CA) income test

Tax-free pensions and benefits

The following payments are tax-free pensions or benefits for the purposes of calculating Adjusted Taxable Income (ATI) for CA.

Carer Payment (CP) where both the carer and the person being cared for are under Age Pension age
Disability Support Pension (DSP), including DSP Blind and Blind Pension, where the recipient is under Age Pension age
Wife Pension (WP) where both the recipient and partner are below Age Pension age
Department of Veterans' Affairs (DVA) invalidity service pension where the recipient is below Age Pension age
DVA disability pension, war widow's and war widower's pension
DVA service pension and partner service pension where both partners are under Age Pension age and the veteran receives an invalidity service pension at the time of death
DVA income support supplement paid on the grounds of invalidity if the person is under Age Pension age
DVA Defence Force Income Support Allowance (DFISA), if the income support payment being received is not taxable, DFISA is not taxable
Special Rate Disability Pension safety net payment (SRDP) paid under the Military Rehabilitation and Compensation Act (MRCA)
Compensation for permanent impairment paid under the MRCA
Additional compensation for impairment from another service injury or disease paid under the MRCA
Interim compensation paid under the MRCA while waiting for compensation payment for permanent impairment or additional compensation payment for impairment from another service injury or disease
Compensation payments made under 234(1)(b) of the MRCA would be included in the widow's estimate of Adjusted Taxable Income (ATI). Compensation payment made under paragraph 234(1)(a) of the MRCA (the wholly dependent partner death benefit) to an eligible widow, will be disregarded for FTB income assessment and Parental Income Test purposes
Compensation payments made under both sections 252 and 254 of the MRCA to children of a widow

If a payment does not appear in the list above, it is not a tax free pension or benefit for the purposes of calculating the ATI for the CA income test.

For example, Prisoner of War Recognition Supplement from the Department of Veterans' Affairs is not taxable income. It is also exempt income for social security purposes. However, it is not a tax-free pension or benefit for the purpose of Adjusted Taxable Income (ATI) for CA.

Payments made by Military Rehabilitation and Compensation Commission

These payments can be paid as fortnightly instalments or as a lump sum. Lump sums are to be treated as income in the tax year they are received. The Military Rehabilitation and Compensation Commission can make payments under 2 Acts:

Military Rehabilitation and Compensation Act (MRCA)
Safety, Rehabilitation and Compensation Act 1988 (SRCA)

Only certain MRCA payments are included as part of the CA ATI These are included in the first list above.

Non-taxable components

The following non-taxable components are not included as part of the person's ATI for CA:

Bereavement period payments, excluding the amount of a Lump Sum Bereavement Payment (LBP) above the tax free amount paid to a partner or carer of a deceased customer (the difference is taxable income)
Carer Allowance (includes saved rate Child Disability Allowance)
Carer Supplement
Energy Supplement payments
Fares Allowance
Incentive Allowance
Language, Literacy and Numeracy Supplement
Mobility Allowance
Self-Employment Assistance Rental Assistance
Pension Supplement - All components of the Pension Supplement are non-taxable, except for the Basic Amount if the customer's primary payment is taxable.
Note: the Basic Amount is not taxable if the customer is a JobSeeker principal carer who has been granted an exemption from their mutual obligation requirements. See Exempting a job seeker from mutual obligation requirements due to special circumstances. The exemption can be identified on the Activity and Exemption Summary (AEX) screen
Pension Supplement paid by DVA - all components of the Pension Supplement are non-taxable except the Basic Amount if they receive a Service Pension. Only the minimum amount is non-taxable if they receive an Income Support Supplement.
Pharmaceutical Allowance
Remote Area Allowance
Rent Assistance
Seniors Supplement paid to Commonwealth Seniors Health Card (CSHC) holders
Single Income Family Supplement (SIFS)
Student Financial Supplement Scheme payments
Telephone Allowance

Acceptable reasons for using a current year estimate for the CA income test

Table 4: This table contains acceptable reasons and conditions that must be met for a current year estimate to be used for the CA income test, and examples of suitable evidence

Acceptable reasons	Acceptable conditions	Examples of suitable evidence (list is not exhaustive)
A person's retirement, or partial retirement from the workforce, or closure of a business.	The estimated reduction in the person's income following the change in circumstance is commensurate with their earnings or business income from the previous financial year.	Proof of retirement, for example a letter from employer accepting resignation Proof of partial retirement, for example a letter from employer confirming a move from full time to part time employment, a part time work contract or a letter from employer detailing agreed reduction in working hours Information from the Australian Securities and Investments Commission (ASIC) that a business has been de-registered, or from the Australian Taxation Office (ATO) that a final income tax return for the business has been submitted Proof of sale of a business
Receipt of an inheritance.	Where an inheritance has been received that has increased their taxable income for the previous tax year, the person must be able to show that their income will return to an amount below $250,000 in the current tax year.	Legal documents to support the receipt of an inheritance.
The person had to reduce their working hours (ongoing) because the care receiver requires more care and the person is personally providing that care.	Either of the following apply: the assessment score for care receiver must be higher or if there is no recent medical assessment, the care receiver's health professional identifies additional care is required because of increased impairment	The most recent Adult Disability Assessment Tool (ADAT) score or Disability Care Load Assessment Determination (DCLAD) completed shows a higher level of care is now required compared to when the person was working longer hours or The carer provides a letter/evidence from the care receiver's health professional identifying additional care is required compared to when the person was working longer hours. The letter/evidence confirms the care receiver has increased impairment.
A substantial loss of income caused by a catastrophic event or natural disaster. Note: COVID-19 is considered a catastrophic event.	At least one of the following must have occurred as a result of a catastrophic event or natural disaster: loss of employment failure of a business, or substantial additional expenses	Receipts or other evidence to support the: loss of employment failure of a business, or substantial additional expenses were due to the catastrophic event of natural disaster
A substantial one-off cost because of the disability/medical condition of the care receiver.	Substantial unexpected/one-off costs because of the disability/medical condition of the care-receiver which has caused the carer or their partner to withdraw money from a superannuation fund, or retirement savings account.	Receipts or other evidence to support a reduction in income due to costs related to the provision of care for the care receiver.

Operational Information