While spending and savings funded from these resources need to be shown in a family's assessment, they will be deducted from the family's actual means. They are:
- a financial institution's or 'arm's length loan';
- prior year savings;
- sale of assets;
- non-taxable compensation payments;
- windfall gains;
- defence Force Reserve payment;
- government benefits;
- isolated secondary boarders concession;
- dependent children's employment income;
- business spending;
- spending on a disabled family member; and
- spending on maintenance payments.
To be deducted, a loan MUST be an arm's length loan. No formal contract is needed for the terms of a loan, nor does interest have to be paid. An arm's length loan specifically includes:
- any transaction that gives effect to an advance of money,
- the provision of credit, and
- any payment that is obliged to be repaid.
A financial institution loan made by a person or body to an assessable family member can be deducted when it is part of the lender's usual business to make loans to members of the public.
Spending that has been funded by the use of prior year savings is not included in family actual means. A net reduction in savings account balances between 1 July and 30 June of the appropriate tax year would substantiate the use of prior year savings.
For spending or savings sourced from sale of assets to be deducted from the FAMT, the assets must have been held before the commencement of the base tax year.
A non-taxable compensation payment is the amount of compensation payment that is not required to be included in taxable income under the Income Tax Assessment Act 1997. This is usually because the payment does not represent lost income. The deduction may relate to some or all of a compensation payment.
Windfall gains are inheritances and lottery wins, but NOT gifts.
Up to a maximum of $6,000 for each family member receiving non-taxable Defence Force Reserve payments and allowances.
Certain government income assistance received by family members can count as a deduction:
- Youth Allowance for students or Australian Apprentices;
- Austudy;
- ABSTUDY;
- Assistance For Isolated Children;
- Pensioner Education Supplement;
- Supplement Loan schemes for Youth Allowance, Austudy, Pensioner Education Supplement and ABSTUDY;
- State or Territory education allowances (e.g., for isolation).
Spending on Assistance for Isolated Children (AIC) or secondary boarders is able to be deducted if it was for boarding students, (including the ABSTUDY customer if they are a dependent secondary student) who qualified for:
- a boarding allowance under the AIC scheme (this includes AIC second home allowance); or
- a dependent secondary student who was required to live away from home for study.
The exempt amount is $5,274 for each eligible family member.
For any dependent children aged 16-24 years and studying full-time, or aged 16-20 years and not studying full-time.
Families are able to exclude up to a maximum of $6,000 for each dependent child of spending and savings derived from income earned by a dependent child.
Employment income includes income derived from bona fide employment in the family business, farm etc (maximum of $6,000).
The following table shows the treatment of a young person's income in the base tax year.
Here are some examples of income for the purposes of the FAMT:
|
If a young person… |
The exempt income is… |
|
is earning an income, |
the amount of spending and savings derived from the earnings (only a maximum of $6,000 will apply). |
|
stops being a family member, |
if the young person stops being a family member who would be assessed for the purposes of the FAMT and is therefore no longer considered dependent, they are no longer part of the family for the purposes of FAMT - and their income should NOT be included. |
|
receives income from a family business, |
employment income includes income derived from bona fide employment in the family business, farm etc (maximum of $6,000). |
Spending on the business that was necessary for carrying on a business and claimed as such under the Income Tax Assessment Act 1997.
All tax deductible business expenditure necessarily incurred in carrying on the business is exempt from the FAMT, EXCEPT:
- superannuation contributions that are above the minimum required under the Superannuation Guarantee (Administration) Act 1992, if a person is employed by the business; OR
- the lesser of $3,000 and the total voluntary contributions made by each family member who were sole traders or partners in a partnership; AND
- donations to charity.
Spending to acquire or modify property necessary to assist a family member with a disability.
Spending on maintenance payments for a former partner or child not in the day-to-day care of the assessable family member.