The Tax Act deals with a wide category of exempt income on which income tax is not payable.
However, such exemptions should still be declared in income tax returns. Although income tax is not payable on exempt income itself, its inclusion in tax returns does alter the rate of tax payable on other income.
Please note that any tax losses carried forward are first applied against exempt income.
Of course, this has created a potential minefield in the tax act and is an area that, in time, will lose a lot of exemptions as the budget comes under pressure.
Items of exempt income
Exempt income includes:
- Bona fide redundancy payments (subject to limits)
- Certain pensions and allowances
- Child care payments
- Commonwealth education payments to assist in the cost of rent, starting employment, travelling,
- Special equipment etc.
- Demerger dividends
- Employment security scheme payments
- Exceptional circumstances relief payments
- Foreign dividends received by an Australian company (where > 10% ownership)
- Foreign earnings of companies operating active businesses through branches
- Frequent Flyer benefits for employees
- Fringe benefits
- International scholarships
- Mutual income
- Open employment incentive bonus
- Pay and allowances for part-time members of the Defense Force Reserves
- Pay and allowances to Australian Defence Force personnel while on operational service
- Periodic maintenance payments received by a spouse, former spouse or child
- Private health insurance payments
- Rent subsidy payments
- Scholarships, bursaries etc., derived by a student receiving full-time education at the school, college or University
- Secondary education and isolated children’s education assistance
- Some allowances paid and the value of rations and quarters for members of the Defense Force
Remember, there is no substitute for proper professional advice. Call into your local TaxAssist Accountants’ office to see an accountant for more specific details.
Date published 23 Nov 2016 | Last updated 31 Jan 2025
This article is intended to inform rather than advise and is based on legislation and practice at the time. Taxpayer’s circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this article, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.
