What is Income?

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As Australia’s tax system is heavily reliant on personal income tax, it is important to understand what the tax office means when using the term ‘income’.

You can receive income as a result of personal exertion (this means by working) or from an investment. Income may NOT always be in the form of money – in some situations goods & services may be treated as income.

If you receive a gift or win a prize, these are not usually treated as income.

The three most common classifications of income are:

  • Assessable
  • Exempt
  • Taxable

Assessable income – is income that can be taxed, provided you earn enough to exceed your tax-free threshold. Some types of assessable income are:

  • Salary and wages
  • Interest from bank accounts
  • Dividends and other income from investments
  • Bonuses and overtime
  • Commissions
  • Pensions
  • Rent

Exempt Income – is income that cannot be taxed. Some examples would be:

  • Some government pensions and payments, including the invalid pension
  • Some education payments

Taxable Income – is the income you receive during a financial year that you have to pay tax on. It is a term that is used for income that is left over after you have deducted all the expenses you are allowed from your assessable income.

Call 03 9416 1679 for any questions regarding income types.