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19 Jul 13 Making a mess of the tax and welfare system

MEMBER 156 writes:

"I present to you yet another example of the lack of any vision or foresight shown by Government. Many years ago, the Government realised that it cost them too much to process the simple income tax return and embarked on a campaign of 'simplifying' personal returns so that fewer were lodged. As soon as they start 'simplifying' they instantly began to over complicate them again, so we were back to where we started.

About a year ago I read and heard politicians again on the simplification trail saying that by increasing the tax free threshold from $6,000 to $18,200 would mean that tax returns would not need to be lodged by countless ordinary Australians. So how is it possible that no one was able to predict that other Government agencies like Centrelink would need some form of information on the Adjusted Taxable Income to assess some forms of welfare assistance like the family tax benefit?? The family tax benefit is claimed by approximately 800,000 families!! It beggars belief. 

We were caught out a few times lodging a 'Non-lodgment advice’ form only to be met with a request to lodge income details with Centrelink. In these cases the income was around $7,000 and with the low income offset it meant that no tax was payable BUT the amount of ATI had a direct effect on the family tax benefit Part B as all good accountants would know.

This type of lack of vision continues to astound me, although it really should not. So it was with amusement that today I read an email from the ATO with the headline 'Low Income Earners may need to Lodge'. Ah, they’ve finally realised about Centrelink, I think. The email reads:

'If your clients' taxable income is under the tax-free threshold, there are reasons why they may still need to lodge an income tax return. The most common reasons your clients may need to lodge are that they:

- are entitled to the private health insurance rebate

- had pay as you go (PAYG) withheld from payments received during the year

- had a reportable fringe benefits amount on their PAYG payment summary

- had reportable employer superannuation contributions on their PAYG payment summary

- made a loss or can claim a loss made in a previous year

- were an Australian resident for tax purposes and had exempt foreign employment income and $1 or more of other income'.

No reference to Centrelink. The most important reason left off the list. They still haven’t quite figured that part out."