6.4.2.10 Verification of Adjusted Taxable Income

Summary

This topic outlines how actual ATI (1.1.A.20) for the relevant income year (1.1.R.23) is assessed when an income tax return is lodged by the individual and/or their partner, and when income tax returns are not lodged.

Actual ATI is required to determine the individual's family assistance entitlement for the purpose of reconciliation.

Verifying components of ATI

Where possible, the components of ATI will be verified by the ATO and Centrelink when the individual and/or their partner (if applicable) lodges their income tax return. This includes individuals and/or their partners who have a valid reason for not lodging a tax return but do so for reasons such as to recoup amounts of tax withheld from their income throughout the year.

If an individual and/or their partner is required to lodge a tax return, they must do so for reconciliation to occur.

Each agency will verify specific components of ATI according to the table below.

Verification when an income tax return is lodged
Component Verified by Information source
Taxable income (including taxable pensions or benefits) ATO Income tax return
Reportable fringe benefits (used to calculated the adjusted fringe benefits total) ATO Income tax return
Total net investment loss ATO Income tax return
Non-taxable pensions or benefits Centrelink See Note
Target foreign income
  • Foreign income as defined in the SSAct
  • Tax exempt foreign employment income
Centrelink ATO Latest individual estimate
Reportable superannuation contributions ATO Payment summary (provided by employer)
Deductible child maintenance expenditure (DCME) Centrelink Latest individual estimate

Note: The amount of non-taxable pension or benefit used will be the latest estimate provided by the individual or the amount of non-taxable pension or benefit paid to the individual or their partner by Centrelink, whichever is the higher. The amount of taxable pension or benefit paid by Centrelink is not compared to the ATO's assessment of taxable income due to an individual's capacity to reduce their assessable income by means such as offsetting business losses.

Verification where an income tax return is not lodged

The manner in which adjusted fringe benefits total, non-taxable pensions or benefits, target foreign income and DCME are verified is the same for all individuals.

However, in cases where the individual and/or their partner are not required to lodge an income tax return, the latest estimate of taxable income, adjusted fringe benefits total, tax exempt foreign employment income, and total net investment loss provided by the individual are used in reconciliation.

Act reference: FAAct Schedule 3 clause 2 Adjusted taxable income

Policy reference: FA Guide 3.2 Adjusted Taxable Income, 6.4.3.10 Valid Reasons for Not Lodging a Tax Return

Last reviewed: 3 January 2017