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Income Tax

Income tax is levied on taxable income. Taxable income is calculated by using the following formula; assessable income less any allowable deductions. Deductions include such things as wages, the cost of stock, rent, bad debts, and previous year losses.

Sole traders are not required to complete a separate return for their business. They use their personal income tax return to report their business income and deductions. Partnerships complete a partnership tax return to show the partnership's income and deductions, and how the profit or loss was shared among the partners. Companies complete a company tax return to calculate the income tax the company should pay.

Individual / Sole Trader:
Income tax is calculated on taxable income, which is the person's assessable income less any allowable deductions.

Resident Tax Rates 2012/2013, 2013/2014, 2014/2015:

Low Income Tax Offset 2012/2013, 2013/2014, 2014/2015:

*$445 offset is reduced by 4 cents for every dollar of taxable income above $37,000. 

Taxpayers eligible for the full offset do not pay tax until their annual income exceeds $20,452.

Resident Tax Rates 2010/2011, 2011/2012:

Low Income Tax Offset 2010/2011, 2011/2012:

*$1,500 offset is reduced by 4 cents for every dollar of taxable income above $30,000. 

Taxpayers eligible for the full offset do not pay tax until their annual income exceeds $16,000.

From 1 July 2011, minors are no longer able to access the Low Income Tax Offset (LITO) to reduce tax payable on unearned income, such as dividends, interest and rent.

This measure does not impact income earned by minors from work. Unearned income of minors, who are orphans or disabled, and compensation payments and inheritances received by minors, are also not impacted.

Resident Minor Tax Rates 2010/2011, 2011/2012:

*Excluding 'excepted income'.

The tax-free threshold is $3,333.  This is because the low income tax offset of $1,500 offsets the tax payable on income up to $3,333.

NOTE: Resident tax rates do not include the Medicare levy of 1.5%. Refer to the Medicare levy section of the ATO website for more information.

Non-Resident Tax Rates 2010/2011, 2011/2012:

Non-Resident Minor Tax Rates 2010/2011, 2011/2012:

*Excluding 'excepted income'.

Note: Non-residents are not required to pay the Medicare levy. There is no tax-free threshold. The low income tax offset does not apply.

For more information about Sole Trader Income Tax please see the TaxPack information at the ATO website.

Partnership:

A partnership that is carrying on a business must complete a partnership tax return to show all income earned and deductions claimed for expenses in the course of carrying on business. Each partner pays tax on their share of the partnership's income. Consequently they must include their individual share of the net partnership profit or loss in their personal tax return.

Company:

A company is a distinct legal entity with its own income tax liability therefore a company tax return must be completed for each company. A company's income tax is calculated as a percentage of the taxable income the company earned during the financial year. The company tax rate is 30%.

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