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INCOME CONTRIBUTIONS
INCOME CONTRIBUTIONS
WILL I HAVE TO MAKE PAYMENTS FROM MY INCOME?
Reproduced by express permission form the Commonwealth Government, Insolvency
and Trustee Services Australia.
January 2004 Edition
Contributions are regular and compulsory payments from a bankrupt's income to
their trustee to repay creditors.
Will I have to pay contributions?
All bankrupts are assessed by their trustees for contribution liability at
the start of their bankruptcy, and at each 12 month interval (Contribution
Assessment Period (CAPJ) during bankruptcy.
Your CAP will generally be the 12 month period beginning on the date of, or
anniversary of, your bankruptcy. Ask your trustee if you do not know.
If your income exceeds a certain threshold (or level) you must pay
contributions.
Low income earners are not required to make income contributions. However,
even if you do not have to pay contributions you may make voluntary payments to
your trustee for the benefit of your creditors.
Your trustee will calculate your contribution liability using the formula on
pages 4-5. The table below is an approximate guide to how much you may have to
pay based on certain levels of before tax income and number of dependants.
|
|
Number of dependants |
|
|
0 |
1 |
2 |
3 |
|
Gross
(before tax)
annual income |
Payments per fortnight
(as at 20 September 2003) |
|
$40,000 |
$0 |
$0 |
$0 |
$0 |
|
$45,000 |
$5 |
$0 |
$0 |
$0 |
|
$50,000 |
$71 |
$0 |
$0 |
$0 |
|
$55,000 |
$130 |
$11 |
$0 |
$0 |
|
$60,000 |
$184 |
$65 |
$6 |
$0 |
|
$65,000 |
$236 |
$117 |
$58 |
$25 |
|
$70,000 |
$286 |
$167 |
$107 |
$74 |
|
$80,000 |
$385 |
$266 |
$206 |
$173 |
What is included as income?
Income for bankruptcy purposes is different to your taxable income.
Income includes:
- any wages and salary (including second jobs)
- tax refunds for financial years during bankruptcy
- value of fringe benefits from your employer or others (eg
use of a car, subsidised housing/rent, free board)
- salary sacrifice arrangements
- business drawings and profits
- benefits and pensions
- income you earn which is paid to another person or entity.
You must disclose all income to your trustee, who will determine whether any
fringe benefits in your job or salary sacrifice are included in your assessment
and, if so, to what extent.
There are penalties for not disclosing all the income and benefits you
receive.
A dependant is a person who resides with you and
- is wholly or partly dependant on you for economic
support, and
- whose income during the assessment period is not more
than the amount prescribed by the Bankruptcy Regulations (currently $2,500
and indexed).
How are contributions calculated?
Your trustee will calculate your contribution liability by:
1. Calculating your assessed income
Your trustee will:
- determine your total income from all sources
- then deduct your income tax (which includes your Medicare
levy) and assessed child support or maintenance payments.
2. Working out your Actual Income Threshold Amount (AITA)
The AITA is based on an indexed figure called the Base Income Threshold
Amount (BITA), adjusted to take into account your dependants.
|
Dependents |
AITA
Net annual income after
tax
(as of 20 September 2003) |
|
0 |
$34,398.00 |
|
1 |
$40,589.64 |
|
2 |
$43,685.46 |
|
3 |
$45,405.36 |
|
4 |
$46,093.32 |
|
More than 4 |
$46, 781.28 |
Indexed figures regularly change in line with the Consumer Price Index or the
base pension rate, All indexed amounts it this pamphlet are correct as at
September 2003. To find out the current BITA see the ITSA website
vvwkb,.itsa.gov.au or contact ITSA (see rear cover).
3. Calculating your contribution liability
Using your Assessed Income and AITA
your trustee will calculate your contribution liability according to the
following formula from the Bankruptcy Act
Assessed Income –AITA
2
Notice of Assessment
Your trustee will send you an Assessment of your contribution liability,
explaining:
- how it was calculated
- when your payments are to start
- their frequency (eg a lump sum payment or fortnightly
payments).
Example
Bob, a bankrupt, advises his trustee that he expects his gross income for the
first 12 months of his bankruptcy to be $65,000, and that during this period he
will have one person dependant on him.
Step 1: the trustee calculates Bob's Assessed Income.
gross expected income
$65,000.00
deduct income tax
17,357.00
deduct Medicare levy
975.00
Assessed Income
$46,668.00
Step 2: the trustee works out Bob's AITA.
AITA (with 1 dependant) $40,589.64
Step 3: the trustee uses Bob's Assessed Income and AITA to calculate
his annual contribution liability.
$46,668 - $40,589.64 = $6,078.36 /2 = $3,039.18
The trustee issues Bob with a Notice of Assessment, and asks him to pay the
sum of $3,039.18 at the rate of $117.00 per fortnight.
Payment arrangements
Your trustee may be willing to alter payment arrangements, particularly if
you are paid on a monthly basis or your income is 'seasonal'.
Arrangements may be made to automatically deduct contributions from your
salary or bank account.
Penalties for non-payment
If you are asked to pay and you do not, your trustee will take recovery
action to collect contributions owing, even if you have been discharged from
bankruptcy.
Your trustee may:
- garnishee (automatically deduct without your consent) from your income or
bank account or from a third person who holds money on your behalf
- extend your bankruptcy to a maximum of 8 years and you may have to pay
contributions for this extended period.
What if my circumstances change?
You must advise your trustee immediately if your income or number of
dependants changes, or you become aware that they will change, even if you have
not been assessed to pay contributions. If you do not advise your trustee your
assessment will be incorrect and you may have not paid enough or paid too much.
At the end of each 12 month period your trustee will re-assess your
contribution liability based on your actual income and dependants for the
period.
If your trustee finds out that you have not paid enough leg because your
income was greater than you estimated) then you will have to make up the
shortfall in contributions. If however you have paid too much the extra payments
cannot be refunded. They will be taken into account in the next assessment.
Hardship variations
If you are assessed to pay contributions but you consider that you will
suffer hardship in paying, you may apply to your trustee to reduce your
contributions.
Hardship grounds are limited to circumstances of an exceptional nature which
would impose an excessive financial burden on you. Those grounds may include:
- your or your dependant's illness or disability that
requires ongoing medical attention
- cost of child day care to enable your continued employment
- private rental expenses that take up a substantial part of
your income
- substantial travelling expenses to and from work
- loss of contribution, usually made by your spouse or
someone residing with you, to your costs of maintaining your household.
Your trustee will be able to explain hardship grounds to you.
- explain why you will suffer hardship
- provide satisfactory evidence of your income and expenses,
including any supporting documents.
Your trustee must:
- decide your application within 30 days after receipt of
your application (if the trustee does not make a decision within 30 days, the
trustee is taken to have refused the application)
- refuse the application if she or he is not satisfied that
you will suffer hardship if required to pay the assessment
- give written notice to you of the decision on the
application, refer to evidence or other material on which it was based and
give reasons for the decision.
Review
If you disagree with your trustee's assessment or decision to refuse a
hardship variation, you are entitled to request a review from Bankruptcy
Regulation.
More information is available in the pamphlet: Can I Appeal?: Review
and appeal of trustee and administrator decisions
Where to contact us
Telephone 1300 364 785
ITSA website wwwitsa.gov.au
ITSA Offices
ACT
Level 2, NFF House, 14-16 Brisbane Avenue BARTON ACT 2600
Tel: 1300 364 785
Fax: (02) 6270 3608
email: itsa.canberra@itsa.gov.au
New South Wales
GPO Box 548 SYDNEY NSW 2001 Level 8, 135 King Street SYDNEY NSW 2000
Tel: 1300 364 785
Fax: (02) 8233 7891
email: itsa.sydney@itsa.gov.au
Queensland
Brisbane
PO Box 10443 Adelaide Street BRISBANE QLD 4001
Level 16, 340 Adelaide Street BRISBANE OLD 4000
Tel: 1300 364 785
Fax: (07) 3360 5466
email: itsa.brisbane@itsa.gov.au
Townsville
PO Box 1527 TOWNSVILLE QLD 4810 Level 1,
National Australia Bank Building 315 Ross River Road AITKENVALE OLD 4814
Tel: 1300 364 785
Fax: (07) 4727 0500
email: itsa.townsviIIe-0itsa.gov.au
South Australia/Northern Territory
GPO Box 2604 ADELAIDE SA 5001
Level 18, Grenfell Centre 25 Grenfell Street ADELAIDE SA 5000
Tel: 1300 364 785
Fax: (08) 8112 4305
email: itsa.adelaide@itsa.gov.au
Tasmania
GPO Box 850 HOBART TAS 7001
Level 4, ANZ Centre 22-26 Elizabeth Street HOBART TAS 7000
Tel: 1300 364 785
Fax: (03) 6221 7700
email: itsa.hobart@itsa.gov.au
Victoria
Level 10, Melbourne Central 360 Elizabeth Street MELBOURNE VIC 3000
Tel: 1300 364 785
Fax: (03) 9272 4900
email: itsa.melbourne@itsa.gov.au
Western Australia
GPO Box H536 PERTH WA 6841
Level 12, Durack Centre 263 Adelaide Terrace PERTH WA 6000
Tel: 1300 364 785
Fax: (08) 9268 1298
email: itsa.perth@itsa.gov.au
More information pamphlets are available.
See the website or contact ITSA for a complete list.
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