Check if tax averaging applies to you as a primary producer.
What is tax averaging?
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.
How is tax averaging calculated?
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, contact us.
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 will be taxed 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 cannot be revoked. After this period, your income will again be subject to tax averaging.
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