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  • What income means

    Find out what we mean when we refer to income. Income can be assessable, exempt or taxable. It is not always in the form of money. Australia’s taxation system relies heavily on personal income tax, so it is important to understand what we mean by income.

    You can receive income as a result of working or from an investment. Income in some situations may be in the form of goods and services.

    Amounts you receive as a gift or win as a prize are not usually income.

    The three most common classifications of income are:

    Assessable income

    Assessable income is income that you can pay tax on, if you earn enough to exceed the tax-free threshold. Examples of assessable income are:

    • salary and wages
    • tips, gratuities and other payments for your services
    • allowances for things like car, travel, clothing and laundry
    • interest from bank accounts
    • dividends and other income from investments
    • bonuses and overtime an employee receives
    • commission a salesperson receives
    • pensions
    • rent.

    Note: If you receive your income as cash including cash cheques, you must declare the cash as income when you prepare and lodge your tax return.

    See also:

    Exempt income

    Exempt income is income that you don't pay tax on. Examples of exempt income include:

    • some government pensions and payments, including the invalidity pension
    • some education payments.

    If the only income you receive during an income year is exempt income you don't have to pay any income tax on it.

    See also:

    Taxable income

    Your taxable income is the income you have to pay tax on. The taxable amount is the amount left after you claim a deduction for all the expenses you can. These amounts reduce the amount of assessable income you pay tax on.

    Assessable income − allowable deductions = taxable income

    Remember: You can only claim deductions where you incur the cost and weren't reimbursed. You also usually need evidence of your expenses.

    Deductions that you apply reduce the amount of income you pay tax on. You do not deduct them directly from your tax amount.

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      Last modified: 21 Jun 2021QC 17709