When navigating our Income Tax and Social Security systems, you may often hear the term Adjusted Taxable Income (ATI). Whilst we are familiar with the term ‘Taxable Income’, we are also faced with the concept of ATI, but what does this refer to?
It is a key factor in determining eligibility for various Government benefits, but also used for the assessment of various other Australian Taxation Office liabilities.
- What is Adjusted Taxable Income (ATI)?
Adjusted Taxable Income is a figure often used by Australian government agencies, such as Centrelink and the Australian Taxation Office.
Centrelink will use this figure to assess an individual’s or family’s entitlement to a range of benefits.
The Australian Taxation Office will use this figure to assess an individual’s or family’s entitlement to a range of offsets and additional liabilities. To further complicate matters, the calculation of the ATI may vary dependent on the item assessed. Other ATI variations include ‘Income for Surcharge’ purposes, ‘Repayment Income’
- How will Centrelink use my ATI?
Centrelink will use your ATI to assess your eligibility for common payments, concessions and services such as Family Tax Benefit, Child Care Subsidy and Commonwealth Seniors Health Card eligibility.
Common payments are listed below:-
- Family Tax Benefit (FTB)
FTB Part A and Part B payments often use ATI to determine how much support families can receive. ATI can influence both the rate and eligibility for these payments. - Child Care Subsidy (CCS)
For working parents, CCS helps cover a portion of childcare costs. Your ATI affects the percentage of childcare fees you can claim. - Parental Leave Pay and Dad and Partner Pay
These payments may also take ATI into account when determining eligibility thresholds. - Youth Allowance, Austudy, and ABSTUDY
If your children or dependants are studying or receiving allowances, your family’s ATI can play a role in deciding their eligibility and how much support they can receive. - Low Income Supplements and Offsets
In some instances, the ATO uses ATI to figure out if you qualify for certain tax offsets or concessions. - Child Support
For separated or divorced parents, ATI is crucial in determining child support obligations, ensuring that each parent contributes fairly based on their overall ability to support their children.
- How does the Australian Taxation Office use my ATI?
In addition to determining eligibility for benefits, ATI (or variances of) can also impact potential additional tax liabilities and rebates administered by the ATO. The most common include the following:-
- Medicare Levy Surcharge (MLS)
Individuals or families who earn above certain ATI thresholds and do not hold adequate private health insurance may be liable for the MLS. If your ATI exceeds these thresholds, you may face an additional surcharge on top of your Medicare Levy. The ATI for this purpose is called ‘Income for Surcharge’ purposes and is a variation of ATI. It excludes some components of the ATI noted below such as tax free pensions and child support you have paid.
- Private Health Insurance Rebate
The private health insurance rebate is income tested. Your ATI influences the rebate percentage you can claim, have claimed or whether you are eligible for the rebate at all. ‘Income for Surcharge’ purposes (as per the Medicare Levy Surcharge) is used for this rebate.
- Government Study and Training Loan Repayments
For this assessment ‘Repayment Income’ is used to calculate the income threshold on which a compulsory repayment is made. Another variation of the ATI which excludes Deductible Personal Superannuation contributions, Tax Free Government Pensions and Benefits, and Child Support payments, but includes exempt foreign employment income.
- Various ATO Offsets
Some offsets (such as the base amount of Zone or Overseas Forces Tax offset, Invalid and Invalid Carer Offset) may depend on ATI thresholds rather than strictly on taxable income
- Entitlement to Government Super Contributions
The Government may make additional contributions to your Super if you are eligible based on your ATI.
- Key Components of ATI
While every program can have slightly different requirements, Adjusted Taxable Income typically incorporates:
- Taxable Income
This is the starting point: your gross income minus any allowable deductions, as per your annual income tax return. - Total Reportable Fringe Benefits
Many employees receive non cash benefits such as a company car or other salary packaged benefits. Where these benefits exceed a certain threshold, they get added back to your ATI as ‘Reportable Fringe benefits.’ - Reportable Employer Superannuation Contributions
If you make certain additional super contributions (such as salary-sacrificed contributions), these may be factored into your ATI. The logic is that while you are reducing your immediate taxable income by contributing more to super, it is still considered part of your overall financial capacity. - Deductible Personal Superannuation Contributions
If you make personal superannuation contributions and claim these as an income tax deduction, these are added back to calculate your ATI.
- Net Financial Investment & Rental Property Losses
This includes any net rental property losses or losses from shares and other investments. If your property or share investments are running at a loss and you claim those losses as a deduction to reduce your taxable income, they may be added back to calculate your ATI. - Tax-free Government Pensions/Benefits
Some tax-free government benefits, like certain forms of disability support or overseas pensions, can be included in the ATI calculation depending on the benefit or payment in question. - Child Support You Paid
Any child support payments you have provided are considered in the overall calculation of ATI.
Combining these items provides a more inclusive measure of your actual financial position. If you are receiving or applying for income tested benefits, always check whether your eligibility is determined by your ordinary taxable income or by your Adjusted Taxable Income.
- Why is ATI Used?
The Government’s primary reason for using ATI is fairness and accuracy. A person’s basic taxable income might not fully reflect their actual spending power or resources. For instance, if someone reduces their taxable income by:
- Salary sacrificing into super, or
- Claiming large rental property losses, or
- Receiving fringe benefits that supplement their take-home pay,
they effectively have more financial resources than their Taxable Income suggests. The ATI calculation aims to capture those additional financial resources for a fairer method of assessing eligibility to various entitlements and payments.
- Keeping Track of Your ATI
Because ATI involves more than the figure on your Income Tax Return, it is essential to:
- Keep records of your fringe benefits statements
- Track your investment income and losses
- Note reportable super contributions (e.g., salary sacrifice)
- Inform the relevant government agency (such as Centrelink) if any of these details change
When completing forms for Family Tax Benefit or Child Care Subsidy, you will often be asked to estimate your ATI if you cannot provide exact figures yet. Providing the most accurate estimate possible helps avoid overpayments or underpayments—and potential debts that arise if you receive more benefits than you are entitled to.
Conclusion
Adjusted Taxable Income is a more comprehensive measure of your financial resources than standard taxable income alone. Knowing how ATI is calculated, why it’s used, and which benefits it affects can help you make informed decisions about your family’s finances—and avoid the surprise of overpayments or missing out on subsidies.
As mentioned above, the calculation is not straight forward and there are variations for different purposes.
If you are uncertain about how to calculate your ATI or how it may affect you, do not hesitate to contact us for further assistance and guidance.
Author: Anita Klumpp
Email: [email protected]
