Repayment of income - overpayment of salary or a benefit

Overview

If you have to repay an amount that you included in your assessable income in an earlier income year, you can seek a reduction of that amount.

Under the law there are different processes to reduce your assessable income depending on whether or not you were entitled to the payment when you received it.

You need to determine if you were:

• entitled to the income - you can generally request a reduction in your assessable income at any time after you have repaid the amount.
• not entitled to the income - you can request a reduction even if you have not repaid the amount.

Were you entitled to the income?

You were entitled to the income if you were correctly paid an amount but later events meant that you were required to repay that amount. For example, you receive a payment on the condition that you will remain with an employer for a specified period but you don't meet the condition and you are required to repay the employer.

You were not entitled to the income if you were paid that amount due to an error or mistake. For example:

• You receive an overpayment mistakenly paid to you of a taxable government pension, allowance or payment that you subsequently have to repay.
• You receive an overpayment of salary mistakenly paid to you by your employer and your employer has advised you that you must repay it.

Receipt of lump sum compensation or damages

Sometimes you may be required to repay an amount of a benefit or regularly paid compensation you received because you later received a lump sum compensation payment or a lump sum payment for damages for a wrong or injury suffered in your occupation.

You will not be able to reduce your assessable income for these amounts because the tax law does not allow this.