Tax Bonuses Are Now a Reality!
As many of you will know, the Government were finally successful in having their economic stimulus package passed by the Senate (subject to a few changes). Key details regarding the tax bonuses as passed are below...
Tax Bonus for Working Australians
Australian residents who had a taxable income of $100,000 or less in the 2007/08 financial year will potentially receive a bonus of up to $900.
To qualify for the bonus, they must have had a net tax liability in their 2007/08 tax return, after allowing for any imputation credits or other tax offsets.
If this condition is met, the bonus will depend on their taxable income in that year, as per the following table:
| Taxable income in 2007/08 | Bonus |
|---|---|
| $80,000 or less | $900 |
| $80,001 to $90,000 | $600 |
| $90,001 to $100,000 | $250 |
Eligibility for the Tax Bonus for Working Australians doesn't depend on family taxable income. Therefore, if one member of a couple had a taxable income greater than $100,000, their lower or middle-income spouse may still be eligible.
Additionally, despite the name of the bonus, it's not necessary to have received income from employment (or self-employment) in 2007/08.
Payments will be made automatically by the ATO from April 2009, through electronic transfer or cheque.
The payment method will depend on which of these options the client selected in their 2007/08 tax return. The bonus cannot be used to offset any future tax liability.
Clients who have yet to lodge their 2007/08 tax return will have to do this before 30 June 2009 to be eligible for the bonus.
Single Income Family Bonus
Families that are eligible (or later deemed eligible) for Family Tax Benefit - Part B (FTB-B) on 3 February 2009, will receive a one-off bonus of $900.
The payment doesn't depend on the number of children in the family group. Families with only one parent will be included, as will two parent families where the lower income earner earns only a small amount of income.
The bonus will also ensure single-income families are not disadvantaged compared to dual-income families who may be eligible for two Tax Bonuses for Working Australians, even though they may have the same level of household income.
Centrelink will automatically pay the bonus to families who receive fortnightly instalments of FTB-B in the fortnight commencing 11 March 2009.
Families who receive their FTB-B as an end of year lump sum will have their bonus added to their FTB payment after the ATO processes their 2008/09 tax return.
Clients who want to receive this bonus earlier could consider switching to fortnightly payments by notifying Centrelink.
In addition, clients whose circumstances change during the financial year (eg they are retrenched) may be retrospectively deemed eligible for FTB-B and the bonus.
Who is eligible for FTB-B?
Families (couples) are eligible for FTB-B where the primary income earner has an adjusted taxable income of $150,000 pa or less and the lower income earner;s income is:
- Less than $22,995 pa, if their youngest child is under age 5, or
- Less than $17,904 pa, if their youngest child is aged between 5 and 18.
Single parent families are eligible for FTB-B if they have an income of $150,000 pa or less.
Back to School Bonus
Families that are eligible (or later deemed eligible) for Family Tax Benefit – Part A (FTB-A) on 3 February 2009, will receive a one-off bonus of $950 per eligible school age child. To be considered eligible, the child must have been aged 4 to 18 on 3 February 2009.
Centrelink will automatically pay this bonus to families receiving fortnightly instalments of FTB-A in the fortnight commencing 11 March 2009.
Families who receive their FTB-A as a lump sum will be paid their bonus after the ATO processes their 2008/09 tax return.
As with the Single-Income Family Bonus, clients can elect to switch their payment method to fortnightly by notifying Centrelink.
Clients will then receive their bonus once the Centrelink arrangements are finalised.
The Back to School Bonus is in addition to the new 50% Education Tax Refund. Therefore, families who spend their bonuses on eligible school expenses will be able to claim the 50% Education Tax Refund up to the relevant expense threshold.
Who is eligible for FTB-A?
For a family to be eligible for FTB-A and therefore, the Back to School Bonus and 50% Education Tax Refund, the maximum income levels are:
- $100,801 a year for a family with one dependent child under age 18, and
- $102,249 a year for a family with one dependent child aged 18 to 24.
| The following table summarises the family income thresholds for one or more children. Income limit at which FTB-A (incl. the supplement) is no longer paid | ||||
| No. of children 0-17 yrs | No. of children 18-24 yrs | |||
|---|---|---|---|---|
| 0 | 1 | 2 | 3 | |
| 0 | $0 | $102,249 | $113,978 | $126,607 |
| 1 | $100,801 | $112,530 | $125,159 | $137,788 |
| 2 | $111,082 | $123,711 | $136,340 | $148,969 |
| 3 | $122,263 | $134,892 | $147,521 | $160,150 |
Case study:
Jack and Kate are married with two children: Tom (aged 5) and Max (aged 7 months). In the 2007/08 financial year, Jack had a taxable income of $85,000 and Kate had a taxable income of $60,000. Both had a net tax liability in that year.
In the current financial year (2008/09), Kate has been on maternity leave since July and Jack expects to earn the same amount of income as the previous year.
As the table below shows, both Jack and Kate will receive a Tax Bonus for Working Australians. Jack will receive a reduced amount (based on his taxable income of $85,000 for 2007/08). Kate, on the other hand, will receive the full amount (as her taxable income in 2007/08 was less than $80,000).
In addition, the family will receive the Single-Income Family Bonus, as they are eligible for FTB-B. This is because Jack's current taxable income is less than $150,000 and Kate's current taxable income is $0.
Finally, as the family is eligible for FTB-A, they will also qualify for the Back to School Bonus for Tom (as he was aged between 4 and 18 on 3 February 2009).
The couple will therefore receive a total bonus payment of $3,350.
| Bonus payments | Amount |
| Tax Bonus for Working Australians (Jack) | $600 |
| Tax Bonus for Working Australians (Kate) | $900 |
| Single-Income Family Bonus | $900 |
| Back to School Bonus (Tom) | $950 |
| Total payments | $3,350 |
Should you have any queries in regards to the tax bonuses, please contact us.
Regards,
DUNCAN MELBIN CA
Director - CapitalQ