Tax Returns 101: Income Declaration

When lodging an individual tax return, you must declare income you have received for each financial year (1st July to 30th June in Australia). While most of your information can now be pre-filled thanks to the advancement of technology, there will be some that you will be required to fill out manually.

Below is a list of incomes that needs to be declared when lodging your tax return.

Employment Income

Possibly the most common one. Employment income refers to the money you receive in a job. You may be paid cash in hand or directly into your bank account or in a different manner, such as cheque.

Regardless or whether you have one or more jobs, or if it’s full time, part time or casual, you will be required to declare employment income on your annual tax returns.

Below are the following types of employment incomes that must be declared:

  • Salary and wages: most commonly from a job. This will include all salary and wages, commission, bonuses, and leave pay, or partner pay, income protection policy, sickness insurance policy and/or workers compensation.
  • Allowances and other employment income: allowances may have been given to you by your employer for things such as travel, company car, laundry, qualifications or certain working conditions, tips, consultation fees, jury attendance fees, etc
  • Sharing economy: taxi travel services, renting out rooms or parking spaces, providing skilled services, supplying tools, completing odd jobs, etc
  • Lump sum payments: usually when you leave a job or in arrears for money owed to you form an earlier income.
  • Reportable Fringe Benefits and Super contributions: such as work car used for private purposes, cheap loans and private health insurance and super contributions made on your behalf by your employer

Super Pensions, Annuities and Government Payments

If you receive income from pensions paid to you as a super income stream, annuities and government payments, you will need to declare.

 

Investment Income

You will generally need to declare investment income regardless of whether or not it’s been paid directly to you or through distributions from a partnership or a trust.

You must declare the following investment incomes:

  • Interest: includes interests earned form financial institutions, term deposits, penalty interests from investments, children’s savings accounts, interest paid or credited by the ATO, life insurance bonuses, foreign interests.
  • Dividends: dividends are usually paid from a listed company, public trading trust, corporate unit trust, corporate limited partnership. The company that are issuing you shares will generally provide you with a statement.
  • Rent: any rental or rent-related payments that you receive or become entitled to such as bond money, insurance payouts, booking fees, reimbursements, etc.
  • Co-ownership: If you own a joint rental property or have an interest in a partnership.
  • Managed investment trusts: cash management trust, money market trust, mortgage trust, unit trust, managed fund such as property, share, equity, growth, imputation or balanced trust.
  • Capital gains: this is the difference between your asset’s cost base – what you paid for it and your capital proceeds- what you received for it.

 

Business Income, Partnerships and Trust Income

This refers to the net income you receive from your business, partnership or trust.

Incomes from a partnership while it doesn’t pay tax on its income, it must lodge a partnership tax return to declare all income earned and all deductible expenses. Each partner must also declare their individual share of the partnership’s net income separately on their individual tax returns.

Incomes from trusts needs to lodge a trust tax return as well. The beneficiaries must also all declare their amount of the trust’s income on their individual tax return, even if they don’t physically receive the income.

Foreign Income

Foreign incomes can include but are not limited to pensions, annuities, employment, investment, business, capital gains. Your foreign income will also be taxed in the source country so potentially it can be subject to double taxation.

Crowdfunding

With this new source of income just surfacing in the recent years, the laws set on this are still quite new and ever evolving. The general rule is regardless of your role in the crowdfund, if you are receiving money, you will need to declare it.

Other Income

Other incomes include but are not limited to:

  • Compensation / Insurance Payments for loss of salary or wages
  • Prizes and awards: such as prize draws, lottery, etc
  • Rendering Professional Services
  • ATO interests – remissions or recoupments

Are you confused about what you have to declare? Book a free consultation with us today to get some advice! http://calendly.com/taxideas

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