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  1. #1
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    Default Family Tax Benefit Part A and negative gearing

    I found what looks like punishment for negative gearers and FTB A.

    See http://www.humanservices.gov.au/cust...-a-income-test

    "Your Family Tax Benefit Part A will stay at (base) rate until your family’s adjusted taxable income reaches $94 316 a year ... will reduce by 30 cents for every dollar over that amount"

    Now income for FTB counts negative gearing as income. Let's go with this example.

    Say the family income is $94316 - the boundary. Say your rental loss is $10000.

    This means you're on the 30% bracket. Your taxable income becomes $84316 Your loss saved you 30% in tax ie $3000. Then you have a baby.

    Now for the FTB part. Your income is counted + loss, ie $104316. Your FTB is reduced 30%, ie $3000.

    At this point you've gained $3k from tax savings and lost $3k in FTB. You're in the same position as if you never had rental income. OK, at least you're getting some capital gains hopefully.

    BUT part of the rental loss (depreciation) you have to pay back in capital gains when you sell. Frankly any capital gains will likely push you to the 45% bracket. You get a 50% discount for holding over 1 year. Say $5000 of that loss is countable. When you sell you'd pay on that 45% of $2500 which is $1125

    So in the future you're paying some extra tax, effectively you're worse off by $1125.

    If you had no rental property, you'd be better off by $1125? Does this sound right? I'm having a hard time getting my head around these numbers, but sounds like I should sell and put the money in the bank?

    Last edited by catbox; 02-10-2012 at 19:11.

  2. #2
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    Could be wrong but I have an investment property and the way I understand it is say your income is $80,000 but you have a $10,000 loss on investment property. You advise Centrelink that your taxable income is $70,0000 plus the $10,000 investment loss.

    You are no worse off by having the investment property.

  3. #3
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    You can test this if you manage to get to their buggy website. Update income estimate and you'll see they only care about taxable income excluding investment loss, so you'd be booked for $90k income.

  4. #4
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    Shameless bump.

    Because Centrelink people often come into this forum to explain these types of things.

  5. #5
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    Hi, I work with the Department of Human Services in a team that responds to questions about Centrelink payments and services on social media sites like this one. I've checked with our subject matter experts, and they gave me the following response:

    It is correct that net investment losses (including rental property losses and other investment losses) are counted as income for Family Tax Benefit (FTB) purposes. However, the family's taxable income would also have been reduced by the losses.

    In the example at the start of this thread, the family income before the negative gearing loss was $94,316 and the rental loss is $10,000. The family's taxable income would therefore be $84,316. The income used to assess FTB would be $84,316 plus $10,000 - total $94,316.

    More information on the income used to assess FTB is explained in this booklet (http://www.humanservices.gov.au/spw/...011-1207en.pdf) on page 21). You can also use our online estimator (http://www.humanservices.gov.au/cust...ine-estimators) to check your entitlements.
    I hope that this information clarifies the queries about how your FTB payment would be affected. With relation to your other questions, our department can't provide advice about what's best for your financial situation, so we'd recommend that you speak to a financial advisor. All the best.

  6. #6
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    OK, so bubbaboo10 was right after all.

    All I can say, this stuff is seriously overcomplicated, I mean does everyone with a baby really need to take part in FTB A, FTB B, Childcare Benefit, Childcare Rebate?

    In the end each family gets a certain benefit, now without saying whether the amount is good or bad, it had to go thru 4 calculations just to get a result!


    I sometimes wonder if administering all these things costs more than the benefit itself!


 

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