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  • Income

    Income tax

    Usually, you pay income tax during the year as you earn income – this system is called pay as you go (PAYG) which could be for either PAYG instalments or PAYG withholding.

    If you are an employee, your employer works out how much income tax to take out of your salary or wages and sends it to us – this is called PAYG withholding.

    Your employer must issue you with a payment summary within 14 days after the end of the financial year (30 June) and report this information to us.

    If you earn income that has not had tax withheld by the payer – for example, if your income is from business activities or you receive rent, dividend or interest income – we may ask you to make payments during the year directly to us. These payments are called PAYG instalments.

    At the end of the financial year, most people need to lodge a tax return to tell us:

    • how much income they received
    • the amount of tax they paid
    • any deductions that relate to their assessable income.

    After you lodge your tax return, we issue you with a notice of assessment. This tells you whether you will receive a tax refund or have to pay us. When you receive your notice of assessment, make sure everything on it is correct.

    There are a number of ways to lodge your tax return. They include:

    • online, using myTax
    • completing a paper tax return
    • using a registered tax agent to prepare and lodge a tax return on your behalf.

    Note: if you are preparing and lodging your own tax return, you have until 31 October to lodge. If you are using a registered tax agent, contact them before 31 October to qualify for their lodgment program.

    See also:

    Income from activities as a special professional

    A special professional is:

    • an author of a literary, dramatic, musical or artistic work
    • an inventor
    • a performing artist
    • a production associate
    • an active sportsperson.

    If you are a special professional, you must show your taxable professional income in your tax return at 'Other income'.

    Your taxable professional income is your professional income minus any deductions attributable to that income.

    Special professionals are subject to averaging – a concessional tax treatment – if they meet certain conditions.

    You do not need to work out your average income or tax payable with income averaging – we will work it out from the amount of taxable professional income you show on your tax return.

    See also:

    Income you need to show on your tax return

    You need to show all your assessable income from the income year on your tax return. These amounts may include:

    • additional services agreement payments
    • allowances – for example, travel allowance or education allowance
    • bonuses – such as match payments
    • capital gains from selling assets like shares, property or goodwill
    • cash payments for work you do
    • contract payments
    • employment termination payments
    • income for services you provide – for example, private sponsorship or endorsement contracts
    • income from overseas – for example, interest, royalties, dividends or rent
    • income from running a business – for example, commercial activities surrounding your public fame, celebrity or image outside of the terms of your playing contract
    • income-protection insurance payments received due to injury
    • inducement or retention payments
    • investment income from rent, bank interest or dividends
    • non-cash benefits
    • payments from sponsors topping up playing contracts
    • players' retirement fund payments
    • prizes and awards – for example, 'player of the match' awards
    • public appearances, product promotions and endorsement payments
    • personal services income
    • representative player payments
    • royalties
    • salary or wages
    • sign-on fees
    • sponsorship payments – for example, from boot sponsorship
    • third-party payments, and benefits from third-party agreements.

    You may also need to include any amounts you receive from someone other than your club as income in your tax return – for example, prize money for the purpose of rewarding you as a player.

    Employment termination payments

    Employment termination payments are treated as income for tax purposes and need to be included on your tax return. Some employment termination payments may be subject to a tax offset.

    See also:

    Non-cash benefits

    There may be circumstances where you, or someone associated with you such as your spouse or children, may receive a non-cash benefit – instead of cash payments – because of your sporting activities or your profile.

    A benefit could be:

    • the use of something – such as a car, house or equipment
    • ownership of something – such as items of clothing or a mobile phone
    • enjoyment of a privilege or facility – such as staying at a holiday house.

    The market value of these non-cash benefits may need to be shown on your tax return as income if they are not subject to fringe benefits tax (FBT) in the hands of your employer. A benefit received in respect of employment may be subject to FBT.

    Fringe benefits

    Non-cash benefits received as part of your employment contract may be classed as fringe benefits. The values of fringe benefits are generally subject to FBT, which is a tax paid by employers.

    For example, under the terms of your playing contract, your club, an associate of your club, or someone acting in an arrangement with your club may:

    • give you a car for private use
    • offer you a low-cost loan
    • provide free private health insurance
    • provide home cleaning services
    • provide you with tickets to entertainment events
    • provide you loyalty program memberships
    • provide you with a living-away-from-home allowance or benefit.

    Certain fringe benefits may need to be reported on your tax return. Your payment summary should show the reportable fringe benefits amount.

    The reportable fringe benefits amount is not counted as part of your total income. You do not pay income tax on it – however, it is used to work out your entitlement to, or liability for, some government benefits and obligations, including:

    • Medicare levy surcharge
    • deductions for personal super contributions
    • government super contributions
    • certain tax offsets
    • compulsory Higher Education Loan Program (HELP), Student Financial Supplement Scheme (SFSS), Student Start-up Loan (SSL), ABSTUDY Student Start-up Loan (ABSTUDY SSL) or Trade Support Loan (TSL) repayments
    • child support obligations
    • certain income-tested government benefits.

    See also:

    Personal services income

    While many footballers undertake their football activities as employees, some undertake these activities as a business operating as a sole trader or through a company, partnership or trust. Income received when those activities are undertaken other than as an employee is classified as personal services income (PSI).

    PSI is income that is mainly a reward for an individual’s personal efforts or skills.

    If you receive any of this income, it needs to be reported as PSI on your tax return. If you are affected by the PSI rules, there are certain deductions you can't claim.

    See also:

    Tax offsets

    Tax offsets directly reduce the amount of tax you must pay – but they are not the same as tax Deductions.

    Deductions only reduce your total assessable income dollar for dollar and your tax payable, at most, by your marginal tax rate.

    With offsets, each dollar of tax offset reduces your tax payable by a dollar, regardless of your taxable income.

    Net medical expenses tax offset

    If you incur medical expenses, you may be eligible to claim the net medical expenses tax offset if you paid for medical expenses relating to disability aids, attendant care or aged care.

    Disability aids are items of property manufactured as, or generally recognised to be, an aid to the functional capacity of a person with a disability. Generally, this does not include ordinary household or commercial appliances.

    Attendant care expenses relate to services and care provided to a person with a disability to assist with everyday living, such as the provision of:

    • personal assistance
    • home nursing
    • home maintenance
    • domestic services.

    Aged care expenses relate to services and accommodation provided by an approved aged care provider to a person who is a care recipient or continuing recipient within the meaning of the Aged Care Act 1997.

    Net medical expenses are your total medical expenses less refunds from Medicare or a private health insurer which you, or someone else, received or are entitled to receive.

    The offset is income tested. The percentage of net medical expenses you can claim is determined by your level of income and family status. There is no upper limit to the amount you can claim.

    You will no longer be able to claim for net medical expenses tax offset from 1 July 2019.

    Contributions paid to a private health fund are not an allowable deduction or a medical expense for tax offset purposes, regardless of whether or not it is a condition of employment.

    See also:

    • Medical expenses – net medical expenses, income thresholds and what you can claim

    Private health insurance rebate

    From 1 July 2015, the income thresholds used to calculate the Medicare levy surcharge and private health insurance rebate will remain unchanged for six years. If your income is over a certain amount, these income thresholds may affect the:

    • amount of rebate you receive
    • rate of Medicare levy surcharge that applies if you do not have an appropriate level of private patient hospital cover and your income is over a certain amount.

    We will determine the amount of private health insurance rebate you are entitled to receive when you lodge your tax return – this may result in a refund or a liability for you.

    See also:

    Residency

    To understand your tax situation, you must work out whether you are an Australian resident for tax purposes.

    Australian residents are generally taxed on their worldwide income, and foreign residents are generally taxed only on their Australian-sourced income.

    Note: the residency tests we use to work out your residency status for tax purposes are not the same as those used by other Australian agencies for other purposes, such as immigration.

    Generally, you are an Australian resident for tax purposes if any of the following applies:

    • you have always lived in Australia
    • you moved to Australia and live here permanently
    • you have been in Australia continuously for six months or more, and for most of the time you have been in the same job, and living in the same place
    • you have been in Australia for more than half of the income year, unless your usual home is overseas, and you do not intend to live in Australia.

    Note: this guide only provides information if you are an Australian resident for tax purposes.

    See also:

    Super

    Super is money set aside over your lifetime to provide for your retirement.

    For most people, super begins when you start work and your employer starts making contributions on your behalf.

    Payments made by your employer into your super fund are known as super guarantee contributions.

    Contributions

    Compulsory employer contributions

    Most people are entitled to compulsory super contributions from their employer.

    These super contributions must be at least 9.5% of your ordinary earnings, up to the maximum contribution base.

    The 9.5% will progressively increase to 12% by the 2025–26 tax year.

    You may also be entitled to choose the fund your super is paid into.

    If you temporarily work overseas for your Australian employer, they must continue to pay super contributions for you in Australia.

    If your employer is not an Australian resident, and you work within Australia for this employer, they should be providing the super guarantee for you for this period of employment. They are not required to provide super guarantee for you when you are working outside Australia.

    Check that your employer is paying the correct amount of super by either:

    • talking to them
    • checking your most recent annual member statement from your super fund.

    If necessary, you can ask us to look into it on your behalf.

    Other contributions and government super contributions

    You can boost your super balance by making your own contributions. When you do this, you may be eligible for government co-contributions.

    If you are a low or middle-income earner , you may be eligible for a government payment into your super of up to $500 per year.

    The amount of government co-contribution you receive depends on your income and how much you contribute.

    When you lodge your tax return, we will work out if you're eligible. If the super fund has your tax file number (TFN) we will pay it to your super account automatically.

    The way your co-contribution is calculated depends on the financial year in which you made your personal super contributions.

    You might want to consider a salary sacrifice arrangement to increase your super. Salary sacrifice is an arrangement where you agree to forego part of your future salary or wages (pre-tax), in return for your employer providing that benefit value into super.

    Note: there are limits on the amounts you can put into your super each financial year without being charged extra tax. Keep track of your super

    If you have ever changed your name, address or job, you may have more than one super account or even have some lost super.

    Combining your super into one account will save you fees. It also makes it easier to keep track of your super.

    See also:

    Accessing your super benefits

    You can access your super when you reach 'preservation age' (usually 60 years old) and retire, or turn 65 years old of age (even if you have not retired).

    There are very limited circumstances that allow you to access your super early.

    See also:

    Goods and services tax

    Goods and services tax (GST) is a broad-based tax of 10% on most goods, services and other items sold or consumed in Australia.

    If you carry on an enterprise, which includes a business, you must register for GST if your gross business income is $75,000 or more.

    Generally, businesses registered for GST:

    • include GST in the price of sales to their customers
    • can claim credits for the GST included in the price of their business purchases
    • need to report these transactions by completing a business activity statement (BAS) – monthly, quarterly or annually.

    See also:

    Your rights and responsibilities

    You are responsible for providing correct information to us. The self-assessment system means we accept the information you provide to us on your tax return.

    We use automatic checks to verify some information, and may later examine your information more thoroughly.

    The Taxpayers' charter outlines your rights and responsibilities under the law and the service standards you can expect when dealing with us. The charter also explains what you can do if you are dissatisfied with our decisions or actions, and sets out your obligations as a taxpayer.

    Self-assessment

    Australia's income tax system works on self-assessment. This means you must show all your assessable income on your tax return and only claim the deductions and tax offsets (formerly called rebates) you are entitled to.

    Under the self-assessment system, we accept the claims you make in your tax return, usually without adjustment, and an assessment notice is issued. Even though we may initially accept the tax return, the return may be subject to further review or audit.

    The ATO can review returns, and may increase or decrease the amount of tax payable. Depending on your circumstances, an assessment can be amended up to four years after we give it to you – however, where fraud or evasion has occurred, there is no time limit to amending the assessment.

    See also:

    Records you need to keep

    You need to be able to show how you arrived at the figures reported in your tax return – in some cases you may be required to provide written evidence.

    In order to prepare an accurate tax return and support the claims you make, you need to keep satisfactory records. The records you need to keep depend on your personal circumstances. Generally, you need to keep your records for five years from the later of the:

    • due date for lodging your tax return
    • date you actually lodge your tax return.

    You are responsible for keeping records to substantiate your claims, even if you use a registered tax agent.

    See also:

    Information matching

    Each year we cross-reference information reported in tax returns against records reported by third-party sources.

    Information we match includes:

    • employment, welfare and investment income
    • property and share dividends and disposals
    • overseas transactions and international funds transfers
    • super information
    • health insurance policies, including the level of cover held by individuals
    • third party reporting (sale of shares and units and business transactions made through payment systems).

    We also undertake large-scale activities involving information exchange with other government agencies.

    See also:

      Last modified: 29 Jun 2018QC 36159