Most of the income you earn will be assessable income. Assessable income is income that you pay tax on, if you earn enough to exceed the tax-free threshold. Examples of assessable income you must declare include:
- salary and wages
- tips, gratuities and other payments for your services
- some allowances, such as for clothing and laundry
- interest from bank accounts
- dividends and other income from investments
- bonuses and overtime an employee receives
- commission a salesperson receives
You may also receive some income in the form of goods or services instead of money. You need to declare the market value of these goods or services as assessable income in your tax return. For example, you may receive clothing, makeup, tools, or accessories from subscribers or fans of your online platforms, or businesses looking to work with you.
If you receive your income as cash including cash cheques, you must declare the cash as income in your tax return.
You can usually claim the tax-free threshold of $18,200 on one source of income you earn in the income year.
Your taxable income is your assessable income minus any allowable deductions. Your taxable income is used to work out how much tax you need to pay.
Assessable income − allowable deductions = taxable income
Allowable deductions don't directly reduce the amount of tax you pay, they reduce your taxable income, which in turn reduces the amount of tax you need to pay.
Exempt income is income that you don't pay tax on (that is, it's tax-free). You may still need to include this income in your tax return for use in other tax calculations.
Examples of exempt income can 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.
Non-assessable, Non-exempt income amounts are those which you don't include as income in your tax return. You can't claim a deduction against non-assessable, non-exempt income.
Non-assessable, non-exempt income can include:
- the tax-free component of an employment termination payment (ETP)
- super co-contributions
- income earned by foreign resident workers under the seasonal (short-term) PALM scheme or former seasonal worker programme
- certain disaster payments and grants.