One of the most important requirement while completing your tax return is to declare all assessable income and tax withheld, this also ensures you are maximsing your tax refund.
Regardless of whether you have one job or more, are full time, part-time or casual you need to make sure all of your employment income is included on your tax return.
Below is the list of all types of income you need to declare on your tax return:
- Employment income
- Super pensions, annuities and government payments
- Investment income (including interest, dividends, rent and capital gains tax)
- Business, partnership and trust income
- Foreign income
- Other income
Let's go through each type of income to ensure you report it correctly on your tax return
1. Employment income to declare
Employment income is money you receive from working. You may be paid cash-in-hand, directly into your bank account, or in another way.
Employment income is divided into six parts as following:
- Salary and wages (normal pay, commission, bonuses, parental pay, income protection or policy)
- Allowances, (car, travel, clothing, jury attendance fees, tips, consultation fee for voluntary work)
- The sharing economy (renting our room & parking, taxi level service, supplying tool and services)
- Lump sum payments (unused annual and payments made in arrears for prior income years)
- Reportable fringe benefits (low-cost loan or work car for private use provided by your employer)
- Super contributions (are made on your behalf by your employer)
2. Super pensions, annuities and government payments to declare
You must declare income you received from pensions paid to you as a super income stream, annuities and some government payments.
Pensions: It is a series of regular payments made as a super income stream (this does not include government payments such as the age pension). You need to include taxed and untaxed element but not tax-free component on your tax return.
These payments may be made by:
- an Australian super fund, life assurance company or retirement savings account (RSA) provider
- as a result of another person's death (death benefit income stream).
- a fund established for the benefit of CWTH, state or territory employees and their dependants
Annuities: An annuity is usually a series of regular payments to you by a life insurance company in return for a lump sum payment. Most annuities have both taxable and tax-free components.
Government payments: It includes the age pension, carer payments, Austudy, Newstart and Youth Allowance.Below list of government payments are exempt from income tax but you still need to declare them on your tax return.
- disability support pension (if you are below the pension age)
- child disability allowance
- carer adjustment payment
- Veterans' Affairs disability pensions and allowances
3. Investment income (including interest, dividends, rent and capital gains tax)
Tax payer is required to declare investment income whether or not it's paid directly to them or through distributions from a partnership (such as a share club) or a trust.
Investment income is divided into five parts as following:
Interest: Interest typically accrues on financial accounts, term deposits and foreign sources of income.
Dividends: These are paid to you as money, shares, and other property. A company issuing shares to you will inform you of whether the issue is considered a dividend or not.
Rent: This is to include the full amount of any rent and rent-related payments that you become entitled to or have received. That being said, you cannot declare defaulted rent unless it is in the form of an insurance payout or rental bond money.
Managed investment funds: This would be any income or credits you received from an investment product.
Capital gains: This amount is the difference between how much you paid for an asset and how much you sold it for.
4. Business, partnership and trust income to declare
The net income you receive from carrying on a business is assessable income and you need to declare it on your tax return. Income includes cash and other forms of payment for goods or services you supply.
Income you receive as an individual running a business:
If you're an individual running a business, you must declare the income you earn from your business on your own tax return, using a separate business schedule.
If you’re an artist, creative or maker, and receiving, or plan to receive, money from creating things such as jewellery, paintings or baked goods, you can use the Hobby or Business tool on business.gov.au
Income from a partnership:
While a business partnership does not pay tax on its income, it must lodge a partnership tax return declaring all income earned and all deductible expenses.
Each partner must declare their individual share of the partnership's net income or loss in their individual tax return and same applies for CGT share or the partnership.
Income from a trust:
Like a partnership, a trust is not a separate taxable entity, but the trustee is required to lodge a tax return for the trust.
Generally, the beneficiaries of the trust declare the amount of the trust's income to which they are entitled in their own tax return and pay tax on it - even if they didn't actually receive the income.
An exception to this is, you don't need to declare a trust distribution if family trust distribution tax has already been paid
5. Foreign income to declare
There are two separate criteria’s to declare foreign income depending on whether you are an Australian resident working in another country or an Australian non-resident working in Australia.
All Australian residents for tax purposes are taxed on their worldwide income and must report all income on their Australian tax return. This includes all of the following:
- Foreign employment income
- Foreign pensions and annuities
- Foreign business income
- Foreign investment income
- Capital gains on overseas assets
If you are a non-resident employed in Australia for the financial year, then you are only required to report your Australian income on your Australian tax return. The rules may be different for your resident country, so it is strongly recommended that you double check those as well.
6. Crowdfunding to declare
Crowdfunding is the method of using the internet and/or social media or another source to find supporters and investors to raise money for a specific fund or endeavour. There are currently four different types of crowdfunding:
Donation-based is when money is paid without expecting or receiving anything in return. The donation may just be acknowledged by the fundee.
Reward-based occurs when the promoter gives the funders goods, services or rights in return for their payments. This could be in the form of a discount, merchandise, etc.
Equity-based is when the promoter provides the funders with interest or shares of equity in return for their payments.
Debt-based is slightly different in the sense that the funder loans money to the promoter who will then agree to pay back the loan interest.
Crowdfunding gets tricky when you consider where you will report the funds on your tax return. This can be determined once you have established what type of crowdfunding you ae dealing with.
7. Other income to declare
Other income you need to declare on your tax return at item 24Y includes
- Compensation and insurance payments for lost salary or wages
- Discounted shares or rights to acquire shares under employee share schemes
- Prizes and awards
- ATO interest - remissions or recoupments