Taxable Income in Australia

Understand what income is taxed and what is classed as exempt in Australia...

Only a few types of income are exempt from tax, including defence and United Nations payments; education payments; certain pensions and social security allowances and payments; social security family payments; certain scholarships, bursaries and other educational allowances; and the income of certain non-profit organisations. The tax law makes a basic distinction between income and capital receipts, and generally only income is assessable. However, capital gains made from the sale of assets acquired after 20th September 1985 are included in your taxable income. Taxable income also includes certain benefits, dividends and bonuses, foreign income, income from partnerships or trusts, interest, pensions, royalties, rental income, salary or wages, and termination payments.

Most government pensions are subject to tax, although a system of rebates ensures that no tax is paid by a pensioner who earns only a small amount of other income. Reductions or exemptions apply to certain other types of income, including lump-sum payments received on retirement, non-cash benefits, irregular income earned by artists, sportsmen, etc., and the income of farmers.

Those with irregular income are permitted to average their earnings out over five years; the tax payable is calculated according to a complicated formula, taking into account 'normal' income and adding this to one-fifth of your 'abnormal' income over a five-year period.

The profit earned in the operation of a business is added to any other income and you're taxed on the total. Each partner in a partnership is taxed individually on his share of partnership income.

Extract from Living and Working in Australia (8th Edition - 2013) David Hampshire Published by Survival Books Ltd, Survival Books, P.O. Box 3780,Yeovil, Somerset, BA21 5WX, United Kingdom. Tel/Fax: (+44) 01935-700060 Copyright © Survival Books Ltd All Rights Reserved