ato logo

Tax averaging

Last updated 25 May 2016

Tax averaging evens out your income and tax payable over a maximum of five years to allow for fluctuations. This ensures that you do not pay more tax over a number of 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. This is included in the tax assessed.

The amount of the averaging tax offset or extra income tax is calculated automatically and your notice of assessment will show you the averaging details. If you are unsure of this calculation, phone 13 28 66.

If you wish, you may choose to withdraw permanently from the averaging system and pay tax at ordinary rates. However, once you make this choice, it will affect all your assessments for subsequent years and cannot be revoked. This means you will be taxed on the same basis as taxpayers not eligible for averaging provisions.