1. Introduction Income Tax

2. Key Concepts
Income
All income that needs to be declared for tax purposes.
Deductions
Reduces assessable income for costs incurred in earning that income.
Taxable Income
Assessable Income less allowable deductions. Used to calculate the prime tax.

3. Step 1 Calculation of Taxable Income
Assessable income
Less
Allowable Deductions
Taxable Income
Equals

4. What is ASSESSABLE INCOME?
The tax act does not define “income”
If it is not income it can't be subject to income tax.
To determine if a receipt is income,
must rely on case law

5. W What is ASSESSABLE INCOME?
A receipt (usually of money) is likely to be included as assessable income if:
It resulted from personal exertion
There is an element of regularity about it
It results from an investment

6. E Examples of Assessable Income
Salary or wages
Allowances, earnings, tips
Lump sum payments
Sales
Interest Income
Commission Income

7. Step 1 Calculation of Taxable Income
Assessable income
Less
Allowable
Deductions
Taxable Income
Equals

8. What are Allowable Deductions?
Generally - costs incurred in the process of generating assessable income or carrying on a business.
These are similar (but not always the same) as accounting expenses

9. What are Allowable Deductions
Examples of general expenses
Work-related car expenses
Work-related training expenses
Office rent
Telephone
Electricity

10. What are Allowable Deductions?
Certain expenses which appear to be non-deductible under the general provisions may be allowable under specific provisions.
Examples of specific deductions
Gifts to approved charities
Cost of Taxation advice

11. SUBSTANTIATION of Allowable Deductions
i.e. proof
Receipts or other documentary evidence to support work-related expenses where the total claim for these is above $300.
This evidence must be kept for five years after lodgement of the tax return.

12. Step 1 Calculation of Taxable Income
Assessable income
Less
Allowable Deductions
Taxable Income
Equals

13. CALCULATING TAX PAYABLE (individuals/business)
From step 1
Tax on taxable Income(income tax)
Less
Tax Offsets
Plus
Medicare Levy & HELP
Less
PAYG

14. Key concepts Tax on Taxable Income for an Individual Tax Offsets HELP
Based on Taxable Income after taking into account the tax-free threshold using the current rates of personal tax
Tax Offsets
Tax offsets can reduce the amount of tax payable.
Eg Low income offset (<$30,000 pa)
HELP
Higher Education Loan Programme ( HELP ) debts.

15. Medicare Levy
The Medicare scheme gives Australian residents access to health care.
Normally, your Medicare levy is calculated at 1.5 % of your taxable income, however…
A reduced Medicare levy or no levy may be available to taxpayers on low incomes.

16. Medicare Levy Surcharge (MLS)
Individuals and families on incomes above the MLS thresholds, that do not have private patient hospital cover pay MLS for any period that they did not have this cover.
We calculate MLS at the rate of (see Notes) of your taxable income. The MLS is in addition to the 1.5% Medicare levy.

17. Tax offsets Examples Medical expenses rebate.
Tax Offsets reduce the amount of tax payable .
Tax Offsets are mostly only available to individual taxpayers.
Only ‘refundable’ tax offsets can result in a tax refund
Examples
Medical expenses rebate.
Private health insurance offset..
Low income offset.

18. Step 2 CALCULATING TAX PAYABLE (individuals)
From step 1
Tax on taxable Income
Less
Tax Offsets
Plus
Medicare Levy & HELP
Equals
Net Tax Payable

19. Income Tax Year
The Australian income tax year is from 1 July – 30 June.
An individual has until 31 October to lodge their tax return unless registered with a Tax Agent

20. Taxable income Tax rates
0=$18, nil
$18,201-$37, c for each $ Over $18,200
$37,001-$80,000 $3572 plus 32.5c for each $1 over $37,000
$80,001-$180,000 $17,547 plus 37c for each $1 over $80,000
$180, $54,547 plus 47c* for each $1 over $180,000
*Includes Budget Repair levy