What is tax averaging?
Tax averaging evens out your income and tax payable over a maximum of 5 years to allow for fluctuations. This ensures that you don't pay more tax over several years than taxpayers on comparable but steady incomes. When your average income is less than your taxable income (excluding capital gains), you receive an averaging tax offset.
When your average income is more than your taxable income (excluding any capital gains), you must pay extra income tax. Your notice of assessment will show you the averaging details.
For more information, see Tax averaging for primary producers.
Calculating tax averaging offset
We calculate the amount of the averaging tax offset or extra income tax automatically and your notice of assessment will show you the averaging details. If you're unsure of this calculation, contact us.
For more information on calculating the averaging tax offset, see Tax averaging for primary producers.
Withdrawing from the averaging system
If you wish, you may choose to withdraw from the averaging system for 10 income years and pay tax at ordinary rates. This means you pay tax on the same basis as taxpayers not eligible for averaging provisions. Once you make this choice, it will affect all your assessments for 10 income years and can't be revoked. After this period, your income will again be subject to tax averaging.
Where you can show a reduction in your basic taxable income is permanently less than two-thirds of your average income for that year you can, in certain circumstances, choose to restart averaging.
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