220.127.116.11 CA income test method statement
This is how to work out whether a person satisfies the CA income test on a day (the test day).
|1||Work out the amount of the person's ATI for the reference tax year (1.1.R.103).|
|2||If, on the test day, the person is a member of a couple, work out the amount of the person's current partner's ATI for the reference tax year applicable under step 1.|
|3||If, on the test day, the person is not a member of a couple, the person has reached the minimum age mentioned in section 301-10 of the Income Tax Assessment Act 1997 and the person has at least one account-based income stream, work out the person's deemed income under SSAct subsection 957D(1).|
|4||If, on the test day, the person is a member of a couple and the person, or the person's partner, or both, have reached the minimum age mention in section 301-10 of the Income Tax Assessment Act and have at least one account-based income stream, work out the person's deemed income amount under SSAct subsection 957D(2).|
|5||Work out the sum of the amounts at steps 1,2,3 and 4 (as applicable).|
|6||The person satisfies the CA income test if the amount at step 5 is less than $250,000.|
Note: The process above is based on the method statement, which is the legislative process for the CA income test. For the full method statement refer to SSAct section 957A.
Act reference: SSAct section 957A CA income test, section 957B Adjusted taxable income, section 957C Accepted estimates, section 957D Income from long-term financial assets, section 1061ZK(3) Qualification: general rules
Example: Member of a couple, deemed income
Lauren and Joe claimed CA for their son, Tim, in October 2021. Their reference tax year is 2020-21. In 2020-21, Lauren's taxable income was $200,000. She also paid $15,000 in child support for children from a previous marriage. Her ATI for 2020-21 is $185,000.
Joe did not earn income in 2020-21. However, he has reached the minimum age mentioned in section 301-10 of the Income Tax Assessment Act and receives a tax-free account-based income stream from a long-term financial asset totalling $600,000. The deemed income amount worked out under provisions for members of pensioner couples is $11,720 below for 2020-21.
Deemed income is calculated as follows (based on deeming thresholds and rates as at May 2022):
- $89,000 (deeming threshold) × 0.25% (below threshold rate) = $222.50
- $600,000 (total asset value) − $89,000 (deeming threshold) = $511,000
- $511,000 (total at step 2) × 2.25% (above threshold rate) = $11,497.50
- $222.50 (total at step 1) + $11,497.50 (total at step 3) = $11,720 (deemed income amount)
Together, their income for 2020-21 is $196,720, and is below the CA income test threshold of $250,000. Lauren and Joe are assessed as below the CA income test threshold.
Example: Estimating income
Jason claimed CA in November 2021 for caring for his partner, Vicky. His ATI for 2020-21 is $260,000 from a salary. Vicky has nil ATI. Jason can show that he has partially retired from the workforce because of Vicki's increased care requirements. His ATI will reduce to $150,000 from a salary for 2021-22 and subsequent tax years. It is acceptable for Jason to use an estimate of income for 2021-22 for his CA claim. His ATI is assessed as being below the CA income test threshold.