Confusion Busters
Welcome to my experimental Australian-family-income estimator.
Some kids love childcare, mine scream and beg me not to leave. So, I made this estimator to check that I earnt enough from working to justify the suffering. It's been helpful to me. So I'm sharing it in the hope that it's helpful to you. But, it's limited, it suits people in circumstances like ours. So if you're paying child support or have another complex situation, it's unhelpful. Also, I'm no accountant or financial planner, so appreciate that I provide the estimates without any warranty - there will be mistakes in my calculations. When you find those mistakes or think of improvements let me know. Trev (Trev@ConfusionBusters.com.au)
All these calculations are for the Australian tax year ending in June 2020.
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Limitations
Some of the limitations are that, the Estimator:
- only considers a full financial year. If you're going back to work in January (say), the numbers will be inaccurate.
- doesn't value the low income health care card. The Card may give you concessional pricing on utilities and transport.
- doesn't include the effect of Division 293 tax, a tax on very-high income earners. If eligible, you'll need to add that back in yourself.
- excludes one-off family benefits (like dad and partner pay) from the totals.
- assumes that private health insurance is useful to you, so doesn't include its cost in the total earnings.
- considers that if you have private health insurance, that your whole family has it for the whole year.
- doesn't handle many benefits, for example it doesn't consider: Austudy, Parenting Payment, Multiple Birth Allowance, Rent Assistance, Seniors and pensioners tax offset, small business tax discount, zone tax offset, overseas defence forces tax offset and about a thousand more.
- assumes that you are a resident for tax purposes (i.e. not a foreign resident or working holiday maker).
- doesn't make any allowance for extra costs during school holidays. Generally, school kid have about 12 weeks a year holidays.
- assumes that childcare is only useful because it lets you work more, so includes it as a cost.
- assumes that your childcare is eligible for the Child Care Subsidy, that is, you satisfy the work, study test, and it's approved (not just registered) childcare, the children are immunised and you meet the residence requirements.
- assumes for the purposes of the Private Health Insurance Rebate that you are less than 65 years old.
- doesn't take into consideration changes in age during the year. It assumes the children are the same age all year.
- assumes that the children have no earnings.
- assumes that children older than twelve and less than twenty are in full-time secondary school.
- doesn't include effects upon superannuation.
- for families eligible for FTB Part A, it assumes no benefits from the Extended Medicare Safety Net.
- ignores FEE-HELP or HECS-HELP or similar loans.
- assumes that you don't have carried over tax losses from previous years.
- assumes that you pay the Medicare Levy at the typical rate, and don't have any exemptions (the Medicare Levy rules are tricky).
- uses the adjusted taxable income (ATI) for all the income tests, some income tests use just part of the ATI adjustments.
- asummes for the Child Care Subsidy (CCS) that you meet the activity tests. The CCS is calculated for centre-based care of 52 weeks a year.
Q & A
Q: How much will we earn if I return back to work?
A: Try entering different annual incomes that correspond to different numbers of days a week of work. For each different setting alter the number of hours of child care that you need. Write down the results, you're probably most interested in the field Annual Family Earnings. Next subtract any extra costs related to working, for example, if you need to operate a car, or purchase public transport tickets. Next, use your favourite calculator to figure out how much your earnings change (not necessarily increase) for each extra day of work.
Q: How can we understand the effect of distributing family trust income or dividends to the parents in our family?
A: Enter your incomes. Then click "generate". You're probably interested in the incremental best allocation. This shows the best annual family earnings you can receive from the extra income.
Q: Can I use this if I'm single, or a couple with no children?
The generate button for sensitivity analysis doesn't work for single parents (ask me and I can get it working). Everything works for couples.
Notes
1. The "best result" isn't actually the best, but an approximate to the best. To approximate it, I slice your combined income into 50 equal pieces, and then evaluate all 50 possible income assignments to the parents. I call the best of those 50 allocations the "best result", it's going to be close to the best.
2. The family earnings shown for $0 is the family earnings for the allocation you've provided, the rest of the income figures assume that just the total increase is distributed to give the best result.