Reforms to Income Tests (RIT)

The following income tests were implemented for the 2010 and subsequent income years:

Adjusted taxable income (ATI)
Rebate income
Income for surcharge purposes.

Adjusted taxable income (ATI)

ATI is the sum of:

Taxable income
Adjusted fringe benefits total (item IT1 label W * 0.510)
Reportable employer superannuation contributions (item IT2 label T)
Deductible personal superannuation contributions (item D12 label H)
Tax-free government pensions or benefits (item IT3 label U)
Target foreign income: item IT4 label V - includes any income earned from overseas that is not already included in your taxable income (for example, exempt from income) or received in the form of a fringe benefit.
Total net investment loss (includes both reportable employer super contributions and deductible personal super contributions - items IT5 label X and IT6 label Y)

Less:

Child support you paid (item IT7 label Z)

Some of the income tests have a slightly different formula and only include some of the ATI components set out above.

The spouse's (or any other dependant’s) ATI is calculated in the same manner.

For the spouse, the labels are found at item SD:

Reportable fringe benefits (label S) if this amount is greater than $3,921 it is adjusted upwards by 0.510.
Reportable superannuation contributions (label A which is the sum of IT2 plus D12 in the spouse's return).
Tax free government pensions paid under the Military Rehabilitation and Compensation Act 2004 that have not been included at label Q - Exempt pensions (label B).
Target foreign income (label C).
Total net investment loss (this is the sum of Net financial investment loss and Net rental loss) (label D).
Child support your spouse paid (label E).

Rebate income

Rebate income is used in the eligibility testing for SAPTO. If you're a Senior Australian, you may be eligible for the seniors and pensioners tax offset (SAPTO).

The SAPTO can reduce the amount of tax you are liable to pay. In some cases, it may reduce your tax liability to zero and you may not have to lodge a tax return.

To be eligible for this tax offset, you have to meet certain conditions relating to your income and eligibility for an Australian Government pension or allowance.

If you're a senior, you must meet the age requirement for the Age pension. This includes if you qualified for the Age pension, but did not receive it.

Depending on your rebate income, you may receive a full, partial or nil offset amount.

If you have a spouse, you will be tested on your combined rebate income for the SAPTO eligibility. The amount of the tax offset is based on your individual rebate income.

In some cases, if you are both eligible for SAPTO, you may be able to transfer your spouse's unused offset to you. We calculate their transfer amount and include this amount when calculating your SAPTO.

Rebate income

MYOB Tax works out 'rebate income' to determine whether you are eligible for the seniors and pensioners tax offset.

Your rebate income includes your:

Taxable income (your assessable income minus deductions).
Adjusted fringe benefits amount (total reportable fringe benefits amounts x 0.51).
Total net investment loss (includes both net financial investment loss and net rental property loss).
Reportable super contributions (includes both reportable employer super contributions and deductible personal super contributions).

Income for surcharge purposes

Medicare Levy Surcharge and Private Health Insurance income tests

To assess your private health insurance (PHI) rebate entitlement, generally your income for surcharge purposes is your:

Taxable income (your assessable income minus deductions).
Reportable fringe benefits amount, as reported on your payment summary.
Total net investment loss (includes both net financial investment loss and net rental property loss).
Reportable super contributions (includes both reportable employer super contributions and deductible personal super contributions).
The amount on which family trust distribution tax has been paid.

You may have to pay Medicare levy surcharge (MLS) if you or your dependants (including your spouse, even if they had their own income) did not have an appropriate level of private patient hospital cover for the whole financial year and your income was above a certain amount.

HECS/TSL/SSL/SFSS repayment income

HELP and SFSS repayment income

For income testing purposes, your repayment income includes your:

Taxable income (your assessable income minus deductions).
Reportable fringe benefits amount, as reported on your payment summary.
Total net investment loss (includes both net financial investment loss and net rental property loss).
Reportable super contributions (includes both reportable employer super contributions and deductible personal super contributions) any exempt foreign employment income amounts included in a tax return.

For calculation of the repayment debt your taxable income is increased by any Reportable Fringe Benefits plus any Reportable Superannuation contributions and the percentage applied is based on the thresholds for the relevant income year. For example, for a taxpayer for taxable income of $119,117 the percentage would be 8% of the adjusted income for HELP Assessment Debt purposes:

HELP Assessment Debt 8.00% of Adjusted income of $119,117:

= 113,349 Taxable Income
+ 3,768 Reportable Fringe Benefits
+ 2,000 Reportable Superannuation contributions

Invalid spouse or invalid carer offset

To be eligible for the Invalid spouse or invalid carer offset:

Your adjusted taxable income (ATI) (including your invalidity and carer payments) must be less than $100,001, or
If you maintained your spouse for the whole year their ATI (including any invalidity or carer payments) for 2015–16 must be less than $10,634.

An invalid can be your:

Spouse.
Parent.
Child, aged 16 years old or older.
Brother or sister, aged 16 years old or older.
Spouse’s parent.
Spouse’s child, aged 16 years old or older, or
Spouse’s brother or sister, aged 16 years old or older.

That person must be receiving:

A disability support pension under the Social Security Act 1991,
A special needs disability support pension under the Social Security Act 1991, or
An invalidity service pension under the Veterans’ Entitlement Act 1986.

Invalid spouse or invalid carer offset

An invalid carer someone who is caring for your or your spouse’s invalid child aged 16 years or older, or your or your spouse’s invalid brother or sister aged 16 years old or older. An invalid carer is your:

Spouse
Parent
Spouse’s parent.

The invalid carer must be:

Receiving a carer allowance or carer payment under the Social Security Act 1991 in relation to caring for that person, or
Wholly engaged in providing care to that person and the person being cared for receives:
A disability support pension under the Social Security Act 1991
A special needs disability support pension under the Social Security Act 1991, or
An invalidity service pension under the Veterans’ Entitlement Act 1986.

Partnership return form RIT measure

Under the RIT measure, the partners are required to include their total net investment loss (which is the sum of financial investment losses and rental property losses) distributed from the partnership at:

Item 50 label G - Net financial investment income or loss.
Item 50 label H - Net rental property income or loss.

The Partnership distribution statement includes reciprocal labels:

Label J - Share of net financial investment income or loss.
Label K - Share of net rental property income or loss.

The amounts distributed to item 13 of the partner’s individual return subsequently find their way into the Income Test items IT5 and IT6.

Tax Pre-fill

This schedule can be pre-filled using the Pre-fill Manager. The Pre-fill Manager enables you to download pre-fill reports for clients using the Practitioner Lodgment Service (PLS). You can view these reports in PDF format, and populate the pre-fill information into the client's Tax return. For more information on pre-filling, see Pre-fill manager.

Tax Pre-fill is dependant on available ATO data. Validate the Tax return by pressing [F3] for a list of the imported values and any errors before lodgment.