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The Department is responsible for calculating the amount of taxable payments it makes to a recipient in a financial year. The formula for establishing the taxable component of a payment is:
Explanation: The amount of tax a recipient must pay depends on their taxable income (see the definition of taxable income in subsection 23(1) of the SSAct) for the financial year. A recipient's expected or possible taxation liability is SOLELY a matter between the recipient and the ATO. Any inquiries regarding either the ATO's requirements or tax assessments should be referred to the ATO.
The following table shows which payments are taxable under each payment type.
|
Payment Group |
Taxable Payments |
|
Newstart & Youth Allowance |
- newstart allowance - YA when the recipient is over 16 |
|
Other Labour Market & Older Students |
- mature age allowance - Austudy payment |
|
Retirement & Widows |
- age pension - age pension (blind) - WP if either person is of age pension age (section 23(5A)) - widow B pension - widow allowance |
|
Families & Parenting |
|
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Disability & Carer |
- DSP to people of age pension age - CP if either the recipient or the care receiver (1.1.C.20) is of age pension age (however, if a lump sum is paid under section 236A of the SSAct because of the death of the care receiver, CP is tax exempt up to the tax free amount) - sickness allowance |
|
Special Payments |
- special benefit - bereavement allowance |
|
Supplementary Benefits |
- education entry payment - bereavement lump sum payment above the tax-free amount - pension supplement basic amount - CDEP participant supplement - WFD supplement |
The following table shows which payments are NOT taxable under each payment type.
|
Payment Group |
Non-taxable Payments |
|
Newstart & Youth Allowance |
- payments made to YA recipients under 16 |
|
Other Labour Market & Older Students |
- |
|
Retirement & Widows |
- WP, for DSP wives, if: - both persons or partners are under age pension age, or - the survivor is under age pension age - pension loan scheme |
|
Families & Parenting |
- double orphan (1.1.D.240) pension - maternity allowance - maternity immunisation allowance |
|
Disability & Carer |
- DSP to recipients under age pension age - DSP (blind) to recipients under age pension age - CP if both the recipient and the care receiver are under age pension age, and if a lump sum is paid under section 236A of the SSAct because of the death of the care receiver, CP is tax exempt up to the tax free amount - carer allowance - mobility allowance - incentive allowance |
|
Special Payments |
- Australian Government Disaster Recovery Payment - crisis payment |
|
Supplementary Benefits |
- rent assistance - the tax exempt pension supplement amount - pharmaceutical allowance - student financial supplement scheme - telephone allowance - remote area allowance - utilities allowance - employment entry payment - bereavement lump sum payment up to the tax-free amount - pensioner education supplement - language, literacy and numeracy supplement Note: LLNS is not added back to taxable income for income testing purposes for FTB or CCB. |
While RAA is non-taxable, on a dollar for dollar basis it reduces the recipient's tax offset. RAA recipients are notified of this on the back of their statement of pension or benefit.
A recipient may be paid a number of different components that are non-taxable and are not related to tax offsets. At the request of ATO, from the 1999-00 financial year non-taxable add-on components are not reported on the PAYG payment summary - individual non-business. Only the non-taxable BASIC component is included in the tax- exempt amount on the PAYG payment summary.
Exception: In certain circumstances, other components will appear in the tax-exempt field. This occurs only when a component can either be taxable or non-taxable which is dependent upon the recipient's particular circumstances. This occurs for the following components:
|
Pensions |
Basic Supplement |
|
ABSTUDY and ABSTUDY Schooling A |
- Additional assistance - Basic to board provider - Basic to boarding school - School fees allowance - Group 2 to school for board |
At the end of each financial year, recipients are automatically advised of the amount of taxable pension or benefit they received during the year.
Exception: If a recipient requests a duplicate PAYG payment summary, it is issued manually.
PAYG payment summary - individual non-business are issued to all recipients who have received either taxable payments and/or tax offset related components irrespective of whether tax has been deducted from payments. No statements of payment are issued. No PAYG payment summary is issued to recipients who receive a payment that is not taxable. PAYG payment summaries can be issued manually to recipients who have only received a non-taxable pension. The following table shows which type of notification recipients receive:
|
Is tax deducted? |
Type of notification received |
|
Yes |
PAYG payment summary - individual non-business |
|
No |
PAYG payment summary - individual non-business |
Each State issues PAYG payment summaries for all payments in that State. Tax details of recipients who move interstate are sent to the receiving State and included in that State's issue.
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Last reviewed: 21 September 2009
