What Income Is Considered Exempt In Your Income Tax Return?

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Are you looking at the approaching 31 October deadline for individual income tax returns with plenty of questions? Don’t worry – your trusted tax professionals are here to help.

One of the more common questions we encounter around this time of the year involves declaring income – or, sometimes, when you do not need to declare income.

Exempt income is income you don’t pay tax on (that is, it’s tax-free). However, you may still need to report these in your tax return as the ATO use certain exempt income amounts to work out other calculations such as:

  • tax losses of earlier income years that you can deduct
  • adjusted taxable income of your dependants.

Exempt income includes:

  • certain Australian Government pensions, such as the
    • disability support pension paid by Centrelink to a person who is under age-pension age
    • invalidity service pension paid under the Veterans’ Entitlements Act 1986 where the veteran is under age-pension age
  • certain Australian Government allowances and payments, such as the
    • carer allowance
    • child care subsidy
  • certain overseas pay and allowances for Australian Defence Force and Federal Police personnel
  • Australian Government education payments, such as
    • allowances for students under 16 years old
    • Commonwealth secondary education assistance
  • some scholarships, bursaries, grants and awards
  • a lump sum payment you received on surrender of an insurance policy where you are the original beneficial owner of the policy – generally you do not earn, expect, rely on or regularly receive these payments – examples include
    • mortgage protection
    • terminal illness
    • a permanent injury occurring at work.

Lodging your tax return can be time-consuming – why not consult with one of our tax advisers for help? Start the conversation with us today.

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