Newsletter

You may be eligible for Child Care Rebate if:

•you use a Child Care Benefit approved child care service;

•you are eligible for Child Care Benefit, even if you earn too much to receive payment, and

•you and your partner meet the Work, Training, Study test or are exempt from it.

You meet the 'work, training, study test' for Child Care Rebate if you and your partner participated in work-related commitments at some time during the week in which you used child care or are exempt from that requirement. No minimum number of hours is required.

Child Care Rebate is different to Child Care Benefit and is not income tested.

The amount of Child Care Rebate you may receive per child, per financial year, depends on which year it is for and your out of pocket expenses. Out of pocket expenses are your total child care fees less the amount of any Child Care Benefit and Jobs, Education and Training Child Care Fee Assistance you may be eligible for.

The amount of Child Care Rebate is based on 50% of your out of pocket expenses. The maximum amount of Child Care Rebate you can get is $7,500 per child per year. The maximum amount payable is called the cap amount.

Once you reach the Child Care Rebate cap for your child for the financial year, you will not be entitled to any further rebate until the next financial year.

To receive Child Care Rebate you need to claim Child Care Benefit for approved child care. You do not need to lodge a separate claim for Child Care Rebate. You will automatically be assessed when you claim Child Care Benefit for approved care.

In some cases you may be assessed as being eligible for Child Care Benefit, but are not actually entitled to any payment because your income is too high. Even though you may not receive any benefit due to your income, you may still be eligible for Child Care Rebate.

Employers, financial institutions, companies, private health funds, other businesses and government agencies provide ATO with information on taxpayers, including details of income received, tax withheld and other tax-related data. The supply of this information is required by law. The ATO match the data they hold with the details you provide on your tax return. If they identify differences, they may send you a letter outlining the discrepancy.

The data matching letters that are issued by the ATO may relate to capital gains tax, dividend income, employee share schemes, employment income, foreign source income, fuel tax credits, government benefits, interest income, Medicare Levy, offsets, partnership and trust distributions to name a few.

If you receive a data-matching letter from the ATO, you will need to review your records. The action you take will depend on whether you agree or disagree with the information included in your letter. Find out what supporting documents you need to provide to verify the income or other information reported in your tax return.

If adjustments are required to your tax return, the ATO will issue you with an amended notice of assessment advising you of any amounts payable and how to pay.

Last year the ATO cross-referenced information reported in tax returns against over 600 million transactions provided to them by third parties to identify omitted income and incorrectly claimed offsets, such as the dependent spouse tax offset.

In the past the ATO has focused on areas such as omitted interest and employment income; however, they are now broadening their information matching to encompass a greater range of areas, such as:

• capital gains tax from the disposal of shares, collectibles, precious metals and property;
• foreign source income; and
• contractor income from payments made by government agencies.

By using this approach, the ATO last year contacted over 500,000 taxpayers who had apparent discrepancies in the information they reported in their tax returns. Nine out of ten returns were amended as a result of their enquiries.

SENIORS HEALTH CARD

From July 2014, The Department of Human Services will be undertaking a new data-matching program in which data of all current recipients of the Commonwealth Seniors Health Card (CSHC) will be matched with data of income tax returns (submitted within the last three financial years) held by the ATO.

This data matching will assist the Department to assess a CSHC recipient's ongoing eligibility for the card. Among other things, the program aims to prevent incorrect program outlays by identifying recipients and their partners with undisclosed and/or under-declared income, deter customers from neglecting to disclose income and promote voluntary compliance through public awareness of the program. It is intended that the CSHC data-matching activity will continue on an annual basis

ATO DATA MATCHING LETTERS

Each year, more than 600 million transactions are reported to the ATO by sources such as financial institutions, share registries, employers, companies, private health funds, state, territory and other government departments. The ATO matches this information, including details of income received, tax withheld and other tax-related data, to the details you provide on your tax return. If they find differences, they may send you a letter outlining the discrepancy.

The type of data-matching letter you receive depends on the type of discrepancy the ATO finds between the details provided on your tax return and data reported to the ATO by employers, financial institutions, companies, health funds and government agencies. Each letter issued will clearly show the financial year to which it relates, will also include a schedule for that financial year showing information from your tax return, the relevant data the ATO holds and the discrepancy found.

The data-matching letters the ATO issue may relate to:

Dividend income

If a company reports that they paid dividends to you, but this does not match the amount you declared in your tax return.

Employment income

If employers send the ATO details of payment summaries for salaries and wages that do not match the amounts you declared in your tax return

Government benefits

If details of benefits paid to you by the Department of Human Services and other government agencies do not match the amount you declared in your tax return

Interest income

If a financial institution reports that they paid you interest, but this does not match the interest amount you declared in your tax return.

Medicare levy surcharge

If the information the ATO receives shows that, for all or part of that year, you and all your dependants (including your spouse) were not a member of a registered fund, or did not have an appropriate level of private patient hospital cover.

Private health insurance rebate

The private health insurance (PHI) rebate is an amount the government contributes towards the cost of your private health insurance premiums. Your eligibility to receive a PHI rebate depends on your single or family income for surcharge purposes. You can receive the rebate upfront through a reduction in the cost of your premiums you pay to your insurer, or in the form of a refundable tax offset when you lodge your tax return. If the ATO receives information from Medicare Australia and your health fund that shows that you may not be entitled to the level of rebate claimed in your tax return.

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When an amount is received from a private company because of a marriage or relationship breakdown the amount is classified as a dividend or a deemed dividend and needs to be included in your assessable income in your tax return.

The one exception is where the Family Court requires the private company to pay money to a spouse who is not a shareholder. In that circumstance, the rules only apply where the obligation to pay the money was imposed by the Family Court on or after 30 July 2014.

A Family Law obligation arises when a private company pays money or other property to a person because of a marriage or relationship breakdown. The payment or transfer of property may arise because of an order of the Family Court that is made against either the private company or one of the parties to the marriage.

An ordinary dividend arises in any circumstance in which a private company pays money or other property because of a family law obligation to a spouse who is a shareholder of the private company.

EXAMPLES

Peter, Jessica and a private company are parties to matrimonial property proceedings before the Family Court. Peter and Jessica are both shareholders of the private company. The Family Court makes an order requiring the private company to pay Jessica $200,000. On 30 April 2014, the private company makes the payment of $200,000 to Jessica. The payment of $200,000 is an ordinary dividend to Jessica for the 2014 tax year.

John, Mary and a private company are parties to matrimonial property proceedings before the Family Court. John and Mary are both shareholders of the private company. The Family Court makes an order requiring the private company to transfer a rental property with market value of $600,000 to John. On 30 April 2014, the private company makes the transfer of the rental property to John. The market value of the rental property ($600,000) is an ordinary dividend to John for the 2014 tax year.

A deemed dividend arises in any circumstance in which a private company pays money or other property because of a family law obligation to a spouse who is not a shareholder of the private company.

EXAMPLES

Bill, Maria and a private company are parties to matrimonial property proceedings before the Family Court. Maria is not a shareholder of the private company. The Family Court makes an order for the private company to pay Maria $200,000. On 30 June 2015, the private company makes the payment of $200,000 to Maria. The payment of $200,000 is a deemed dividend to Maria for the 2015 tax year.

Max, Denise and a private company are parties to matrimonial property proceedings before the Family Court. Denise is the sole shareholder of private company. The Family Court makes an order for the private company to transfer a rental property with market value of $500,000 to Max. On 30 June 2014, the private company makes the transfer of the rental property to Max. The market value of the rental property ($500,000) is a deemed dividend to Max for the 2014 tax year.

WHAT AMOUNT MUST BE INCLUDED IN YOUR ASSESSABLE INCOME IF YOU RECEIVE AN ORDINARY DIVIDEND?

If you have received an amount of money, it is the amount of money which you must include in your assessable income. For property, it is the market value of the property that you must include in your assessable income.

WHAT AMOUNT MUST BE INCLUDE IN ASSESSABLE INCOME IF YOU RECEIVE A DEEMED DIVIDEND?

If the private company has a distributable surplus less than your deemed dividend you include the amount of the distributable surplus in your assessable income. If the private company has a distributable that is equal to or more than your deemed dividend, you include the amount of your deemed dividend in your assessable income.

EXAMPLE

Private company has a distributable surplus of $300,000 and the market value of the property transferred to Jeff on 30 January 2014 is $500,000. As the distributable surplus ($300,000) is less than the market value of the property ($500,000), only $300,000 is included as assessable income for Jeff for the 2014 tax year.

CAN YOU CLAIM A FRANKING CREDIT?

You can claim a franking credit regardless of whether you receive an ordinary dividend or a deemed dividend provided the private company has franked the dividend.

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