Taxable professional income
Taxable professional income (TPI) is the amount (if any) remaining after you subtract from your assessable professional income both the:
- total of the deductions that reasonably relate to your assessable professional income
- part of any apportionable deductions (for example, gifts to charity you show in your tax return) that are taken into account in calculating your TPI.
Assessable professional income
Assessable professional income is used in calculating your TPI. It is income arising directly from the activities of a special professional and includes:
- rewards and prizes
- income from endorsements, advertisements, interviews, commentating and any similar service
- royalties from copyright of a literary, dramatic, musical or artistic work
- income from a patent for an invention.
If you're an author or inventor include as your assessable professional income the income you derive from activities of a special professional where you:
- are engaged or commissioned to produce one or more specified works
- invent one or more specified inventions
- have any previous or successive engagements or commissions that don't result in continuous engagement over a substantial period of time.
The following are specifically excluded from assessable professional income:
- any income you derive from
- coaching or training competitors
- umpiring or refereeing sport
- administering sport
- being a member of the pit crew in motor sport
- being a theatrical or sports entrepreneur
- owning or training animals
- a super lump sum or an employment termination payment
- payments for unused annual or long service leave on retirement or termination
- a net capital gain.
Average taxable professional income
Average taxable professional income (ATPI) in an income year is one-quarter of the sum of your TPI for each of the preceding 4 years. Special rules apply for working out the ATPI if your first income averaging year is less than 4 years ago.
In the first 4 years, you work out ATPI as follows, if you are an Australian resident during the year immediately before your year 1:
- Year 1 is nil.
- Year 2 is one-third of TPl in year 1.
- Year 3 is one-quarter of the sum of your TPI in years 1 and 2.
- Year 4 is one-quarter of the sum of your TPl in years 1, 2 and 3.
If you aren't a resident at any time during the year immediately before your year 1, contact us.
Above-average special professional income
Your above-average special professional income is the amount of TPI you earn during the income year that is more than your average TPI.
Your tax payable is the sum of tax on your above-average special professional income and tax on your other income (Step 1 explains ‘other income’). If there is no above-average special professional income (that is, your TPI is equal to or less than your average TPI) you'll pay tax at ordinary rates on your taxable income.
Continue to: How to work out tax payable with income averaging
Return to: Types of special professionals