• Calculating taxable income

    Attention

    Warning:

    This information may not apply to the current year. Check the content carefully to ensure it is applicable to your circumstances.

    End of attention

    Taxable income is calculated as the difference between an organisation's assessable income and allowable deductions.

    Taxable income

    =

    assessable income

    -

    allowable deductions

    The taxable income of a club, society or association is calculated in the same way as a company for tax purposes.

    One particular issue that affects many clubs, societies and associations is the taxation treatment of mutual dealings with members.

    As a result of the mutuality principle:

    • receipts derived from mutual dealings with members are not assessable income (these are called mutual receipts)
    • expenses incurred to get mutual receipts are not deductible.
    Attention

    Mutual receipts are not subject to income tax because they are not assessable income - not because they are exempt income.

    End of attention
    Further Information

    For information on the principle of mutuality, see Taxable income and mutuality in Mutuality and taxable income.

    End of further information

    Because of the mutuality principle, revenue and expenses of an organisation fall within one of three categories for income tax purposes.

    Category

    Revenue

    Expenses

    1

    Non-assessable

    Non-deductible

    2

    Assessable

    Deductible

    3

    Apportionable

    Apportionable

    The three categories are used in the following four steps to calculate an organisation's taxable income.

    Step 1: Classify revenue into non-assessable, assessable and apportionable.

    Step 2: Classify expenses into non-deductible, deductible and apportionable.

    Step 3: Separate the apportionable items by appropriate methods.

    Step 4: Calculate the taxable income.

    Further Information

    See Mutuality and taxable income for information on:

    End of further information
    Last modified: 20 Jul 2015QC 26072