I know this is probably a tricky one, but I just don't have time to call CLink today (will do on Wed next week when DD1 is at daycare), but I just thought of something and now I'm really worried about how my payments will be affected.
Long story short is, DH's inheritance is about to be finally sorted out. We've been working for the past 18 months or so to figure out where all the money is and get it all paid to the estate of his late mum, as per her final wishes in her will. Everything is to be split 50/50 between DH and his little brother, including the house we're currently living in.
Anyway, we've finally finished jumping through the hoops that the superannuation and life insurance companies have set out for us and it looks as though everything will be finalised and paid to the estate in the next few weeks. DH intends to take his half of the inheritance immediately to pay off the rest of the house (around $30k owing), pay out our car loan, and put the rest in a term deposit to save for our first home, which we won't be looking at doing for at least another three years.
My question is, what effect will all this have on my Family Tax Benefits? I got stuck last year when DH got a pay rise and didn't tell me about it, I ended up getting overpaid a lot and had to pay back around $4k (in addition to the $600 per child or whatever that FAO holds back to give out at tax time). I certainly don't want that to happen again at tax time this year, and I definitely want to do the right thing and tell FAO what's happening NOW so that they can adjust my payments accordingly. But, I'm not 100% sure of the actual numbers involved (ie I don't know how much money DH is inheriting, he doesn't either), and I don't want to get to tax time, fill out the forms, only to find that my payments will be entirely suspended AND I have to pay back thousands of dollars, kwim? I don't have any of this inheritance now, but the way FAO asks the questions, it's hard - like 'Okay, I got $20k two weeks before tax time' but they count that as the entire year beforehand so they consider you to have been overpaid, kwim? Which I understand, but this is really tricky for me to 'get'...
I know DH will be fuming if my payments get cut off, as right now we really do need that money to help pay for the day-to-day stuff (I get about $300 a fortnight at the moment), and he has no intention of using the inheritance to live our lives, it's for our future, kwim? I know FAO won't see it that way though and I'm worried about what his reaction will be. I just don't know how it's going to affect my payments, does anybody else have any idea?
TIA for any advice or personal experience!
Hi, it will not be classed as income for ftb purposes unless it generates an income. ie if you invest it and receive interest. Then you would need to declare the interest.
I'm pretty sure Kylie is right. You could also be "gifted" money and not have to declare it until it generates extra income. My Dad and stepmum are quite generous at Christmas... one year their cheque would have pushed us over the threshold of one of the payments... but we didn't have to declare according to an accountant. We use the money to pay for school fees basically anyhow... it's not like we are living in luxury because of it.
I know it's on the Centrelink website, just can't find it at the moment!
But I did find this: bear in mind though that this says it's for a Social Security payment. FTB payments are Family Assistance payments. But from memory, it may fall under this as well. If BG can remember, that'll be great
Lump sums If you receive a lump sum amount while receiving a Social Security pension or allowance, the treatment of that amount under the income test will depend upon the nature of that lump sum. Generally, lump sum amounts that represent a profit or payment for a service are treated as income for a period of 52 weeks from the date you are entitled to receive that money. Certain other lump sums are exempt from the pensions and allowances income tests. Exempt lump sums These share common characteristics. They: • are generally unlikely to be repeated • could not be reasonably predicted, and • do not represent money paid to you for a service, or profit. Exempt lump sums include: • a one time gift • an inheritance • an irregular superannuation amount (such as commutation of a superannuation pension) • compensation and insurance payouts for damages to property or personal effects • value of emergency relief such as financial assistance for floods, bushfires and droughts • redress payment from State Governments for the Forgotten Australians, and • a one off windfall gain e.g. a lottery win, or receiving a prize/reward. While the receipt of the lump sum is exempt under the income test, the lump sum amount is immediately treated as an assessable asset. If this is a financial asset, the deeming rules are applied—see the factsheet Deeming. Lump sum amounts treated as income Apart from the exempt lump sums, other lump sum amounts will be apportioned as income over a 52-week period. Common examples of lump sums treated as income over 52 weeks are: • a distribution from a family trust • a commission or royalty • profits e.g. a distribution from a profit sharing agreement • a grant or scholarship • a lottery win that is paid as a series of payments under one contract, e.g. ‘Win $10 000 a year for life’ • payments to a professional sports person such as a signing-on fee, sponsorship or endorsement payment • a dividend or distribution from a private company, and • certain loan arrangements where there is no expectation that the loan will be repaid. The lump sum amount is also immediately treated as an assessable asset. If this is a financial asset, the deeming rules are applied—see the factsheet Deeming.
FTB is not impacted by the income test that Jody has listed - that only applies to income support payments (parenting, newstart etc)
contact ATO and query with them what investing the money will mean tax wise - if ATO deem any of it income, than FAO will - generally it's only the income earned that is taxable (unless you go and buy an investment property - then it will have other implications).
I have been through this. I was advised to put all the money into a trust account in the name of one of my children. Centrelink cannot ask questions relating to your child's bank accounts.
FTB A & B and inheritance?
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