In order to enhance the fairness and integrity of the tax and transfer systems the Rudd Government will remove inconsistencies in the treatment of non-wage remuneration and take better account of certain losses.
The measures will ensure various tax and transfer programs are fairer and better targeted to those in need of government assistance.
From 1 July 2009, income tests used to determine eligibility for a range of government financial assistance programs will be tightened to include forms of non-wage remuneration and, where appropriate, losses from discretionary activities.
The changes will mean, for the purpose of means tested benefits, individuals who have access to salary sacrifice to reduce their taxable income will be treated on an equivalent basis to those who do not have access to salary sacrifice arrangements.
Salary sacrifice contributions to superannuation will be assessed as income for all relevant tax and transfer programs. The programs include income support payments for customers below Age Pension age (as is the case for those of Age Pension age), family assistance, child support and a range of government assistance delivered through the tax system.
Individuals will continue to have access to tax benefits that accrue through salary sacrifice however these benefits will no longer automatically flow through to the assessment of means tested personal benefits and tax offsets.
Reportable fringe benefits will also be assessed as income in those government support programs that do not include them.
Net financial investment losses will be added to income in all applicable tax and transfer programs. Affected programs are family assistance, the Higher Education Loan Program and particular tax offsets. Net rental property losses will also be added to income for those programs where they are not already included.
The reforms to income tests provide an overall saving to the budget of around $522 million over the next four years. This saving is achieved by focusing financial assistance on low- and middle-income families.