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Worried you’re missing part of your refund? Remember, the low and middle income tax offset isn’t a refund on its own – it’s used to offset (or reduce) the amount of tax you pay. The offset amount you may be entitled to is automatically applied and could range between $255-$1080, depending on things like your taxable income and how much tax you’ve paid.
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Re: How is disablement and TPD treated re:income tax and child care subsidy?

Enthusiast

Replies 14

Thanks @AriH, just to clarify - are you saying that for example if all of your income is a taxable component of a TPD (taxed at 22 %), and this falls under the threshold, you would get the taxed amount (the 22 %) returned to you in a tax return as is the case for a "normal" taxable income?

ATO Community Support

Replies 13

Hi @GCL

 

Correct. You should be issued with a payment summary at the end of the year if the amounts are assessable.

 

Ari

Enthusiast

Replies 12

Great, thanks for your help @AriH.

 

One final scenario it would be helpful for you to respond to - if the taxable portion of a TPD payment for the year is eg 40k, and one has already paid 22 % upon receiving the sum, etc. Would that mean you would then receive a tax return on the tax free threshold portion and any amount above that would simply remain as it was received ie the 22 % is the entire taxable amount? Or is any amount above the threshold also taxed then a second time as a type of  income.? I assume the single taxation is the case but I just wanted to make it explicitly clear. Thanks!

ATO Community Support

Replies 11

Hi @GCL

 

So we'll work out your tax liability based on your taxable income and the tax free threshold will be taken into account in our calculation. You won't be taxed a second time. If you haven't paid enough tax in the first instance then you'll owe.

 

Here is a simple example and I have just made up figures. -

 

Taxable income $40,000

Tax paid $8,000

 

Tax liability $4,000

 

Refund to you = $4,000 (tax paid $8,000 - liability $4,000)

 

Ari

Enthusiast

Replies 10

@AriH ok thank you that makes sense.

 

Could you then finally just indicate how a standard additional eg investment income of 10k be then classified? I believe you had suggested previously that it would be considered at the tax bracket that the TPD brings the income up to?

 

I'm sorry I can't recall the exact tax bracket but let's say that you have a TPD income that comes exactly up to the 32.5 % bracket (for argument's sake). Is a 10k standard additional income then taxed at this 32.5 % rate, because of the way in which the assessable incomes are prioritised? Or does it fall within the lower tax bracket and a larger portion of your TPD payment remains taxed at the 22 %?

 

Thanks for all your input!

ATO Community Support

Replies 9

Hi @GCL,

 

The extra $10000 interest income will be over and above the TPD. Say your taxable income is $50000, tax payable is $5092(19% tax) + $1625(32.5% tax) and medicare levy = 50000 x 2% = $1000. Total tax payable is $7717. Bear in mind we apply the LIMTO (Low income and middle income tax offset) reducing your tax payable.

 

Please use the links for further information.

 

Individual tax rates.

LMITO.

Online services (mytax) simulator. You can practice lodging your return using our simulator. No personal details are recorded and you cannot lodge this at the end. However it can provide a tax estimate based on the amounts you include.

 

I hope this helps.

 

All the best.  

Enthusiast

Replies 8

Hi @Jodie_ATO, thanks for your input.

 

I understand that in the example the 10k would be above the TPD, but I understood this would be broken down as:

40k TPD taxable potion = 18.2k tax free (22 % tax becomes a credit, so 4k return amount) + 21.8k stays the same (was already taxed at 22 % when released from super). The 10k would then be split into 5k being within the 19 % tax bracket (as income would then reach 45k, $950 tax) and 5k in the 32.5k bracket (income above 45k, $1625 tax). So in this situation someone would actually get 4000 - 950 - 1625 = 1425 in a tax return - haven't included the Medicare levy, other offsets etc as I am trying to just understand the TPD vs normal income breakdown. Am I correct in the above?

 

Your example seems to just be calculating based on a normal 50k income.

ATO Community Support

Replies 7

Hi @GCL,

 

When @Ari did your calc's it was a made up amount and not the actual calculation. We generally do not complete calculations for clients as there are variables when you lodge. This is also why I provided you with the myTax simulator link. You can enter all your figures and it will provide you with a tax estimate. You can then show calculations and it will drop down to show you what amounts have been used to calculate your tax estimate.

 

When you actually lodge is also when we will apply the TPD offset and LMITO. Whilst we try to assist you in working out your amounts, we cant guarantee the figure's we provide are accurate.  

 

The calculation for TPD's is A - B - C = tax offset. I have also included a link below from a previous post to assist you with this. 

 

If you wanted to work out your exact amounts you may wish to speak with a tax agent.

 

 

Links-

TPD lump sum and tax.

A - B - C = offset. ChrisATO 5th March 2020 post.

 

All the best.

Enthusiast

Replies 6

Thanks @Jodie_ATO, I realise it was only an example - the numbers I used were also an example. My confusion stemmed from your example figures. Ari's example was a TPD-only income, so it is quite easy to understand. I was trying to see what happens when there is a combination of normal and TPD income - your calculation example appeared to be of a standard 50k income.

 

Thanks for your help though, I will just try and use the calculator/simulator myself and see what I can come up with.

ATO Community Support

Replies 5

Hi @GCL,

 

I actually discussed your tax rates with a colleague in relation to your last post. He advised using the A - B - C = TPD offset would give you the best estimate. We personally do not know how this will affect your overall calculations.

 

Apologies if my previous post using the 50k income did not apply the correct tax rates. You will be credited the amount of tax withheld from the super fund on your return. This should be the correct amount of withholding in relation to your TPD. Once you include the $10k interest, it will depend which tax bracket it puts you in. However, your TPD amount is the figure that should remain at the 22% tax rate.

 

All the best with the simulator and let us know how you go.