[et_pb_section fb_built=”1″ custom_padding_last_edited=”off|desktop” _builder_version=”4.27.2″ custom_margin=”0px||0px||false|false” custom_padding=”0px||0px||false|false” custom_padding_phone=”0px||||false|false” da_disable_devices=”off|off|off” locked=”off” global_colors_info=”{}” da_is_popup=”off” da_exit_intent=”off” da_has_close=”on” da_alt_close=”off” da_dark_close=”off” da_not_modal=”on” da_is_singular=”off” da_with_loader=”off” da_has_shadow=”on”][et_pb_row column_structure=”1_3,2_3″ _builder_version=”4.27.2″ background_size=”initial” background_position=”top_left” background_repeat=”repeat” width=”100%” custom_margin=”0px||0px||false|false” custom_padding=”0px||0px||false|false” global_colors_info=”{}”][et_pb_column type=”1_3″ module_class=”table-contents” _builder_version=”4.23″ background_color=”#f3f2f6″ custom_padding=”25px||25px||true|false” sticky_position=”top” sticky_limit_bottom=”section” sticky_position_tablet=”top” sticky_position_phone=”none” sticky_position_last_edited=”on|desktop” border_radii=”on|24px|24px|24px|24px” global_colors_info=”{}” custom_padding__hover=”|||”][et_pb_text _builder_version=”4.23″ text_font=”||||||||” global_colors_info=”{}” background__hover_enabled=”on|desktop”][\/et_pb_text][\/et_pb_column][et_pb_column type=”2_3″ _builder_version=”4.16″ custom_padding=”|||” global_colors_info=”{}” custom_padding__hover=”|||”][et_pb_text admin_label=”Intro” _builder_version=”4.27.6″ header_2_font_size=”32px” custom_padding=”0px||0px||false|false” hover_enabled=”0″ header_2_font_size_tablet=”30px” header_2_font_size_phone=”26px” header_2_font_size_last_edited=”on|tablet” global_colors_info=”{}” sticky_enabled=”0″]<\/p>\n
Whether you\u2019re running a business, working as a paid employee or earning money through various other means like being a sole trader, as an Australian taxpayer, you need to learn what constitutes income. So strap in, because our complete guide will break down exactly what defines \u2018income\u2019 while also highlighting a few important aspects like gross income, net income, taxable income, and how they can affect your tax return<\/a>.<\/p>\n Income is essentially all money or monetary value earned through employment, investments, business activities, and a number of other sources, either regularly or every so often.<\/p>\n This includes things like wages and payroll<\/a>, salary, business earnings, dividends from investments, interest from savings and more. The amount of income you receive will also impact how much tax you\u2019ll pay at the end of the financial year, as well as your eligibility for government payments and your overall financial planning.<\/p>\n This is the total income received before any deductions or expenses are considered. It includes everything paid by an employer or generated from a business, investments or other income streams. Let\u2019s say your employer pays you a salary of $80,000 per year \u2013 this is your gross income.<\/p>\n Net income is the amount left after accounting for expenses, taxes, and other deductions from your gross income. Think of it as essentially being the money you take home. For example, if you earn $80,000 gross income annually and pay tax, contributions to superannuation and other allowable deductions of around $20,000, then your net income would be $60,000.<\/p>\n [\/et_pb_text][et_pb_image src=”https:\/\/www.reckon.com\/au\/wp-content\/uploads\/2025\/05\/Taxable-income-formula-2.png” alt=”Taxable income formula” title_text=”Taxable Income Formula 2″ align=”center” admin_label=”Image” _builder_version=”4.27.4″ _module_preset=”default” custom_padding=”||20px||false|false” global_colors_info=”{}”][\/et_pb_image][et_pb_text _builder_version=”4.27.4″ _module_preset=”default” global_colors_info=”{}”]<\/p>\n This is the portion of your gross income that\u2019s used to calculate how much tax you owe to the government. It involves subtracting allowable deductions from your assessable income. In simpler terms:<\/p>\n Taxable income = Assessable income \u2212 Allowable deductions<\/em><\/strong><\/p>\n Allowable deductions reduce your taxable income, thereby lowering how much tax you\u2019re obligated to pay. Examples include work-related expenses, investment costs, charitable contributions, etc.<\/p>\n In Australian tax law, income received falls into several different columns:<\/p>\n Most of the income taxpayers earn is assessable income, meaning you need to report it on your tax return and, in most cases, pay tax on it. Assessable income includes things like:<\/p>\n Exempt income is the income you don\u2019t pay tax on. Even though you don\u2019t pay tax, you will still need to report any exempt income on your tax return, as it could have an effect on how other payments or entitlements are calculated. Examples for exempt income include:<\/p>\n If exempt income is your only income during a tax year, you won\u2019t have to pay any income tax on it.<\/p>\n As the name suggests, non-assessable, non-exempt income is the money you don\u2019t include in your tax return and can\u2019t claim deductions on. A few examples of this type of income include:<\/p>\n If you are one of the many small business owners in Australia, your income can come from various sources, including cash, digital payments, vouchers, goods or services. You\u2019ll need to stay on top of this and report your business income correctly when it comes time to lodge your tax return. Some of the most common business income sources include things like:<\/p>\n Remember: tax law means you have to keep accurate financial records for at least five years.<\/p>\n Income from investments, such as dividends, interest, and rental-property earnings, must be included in your total income. Dividends received from company shares, for example, or interest earned on savings accounts are both types of assessable income and therefore must be declared at tax time.<\/p>\n Every Australian taxpayer has to report their income earned every year by lodging a tax return with the Australian Taxation Office (ATO). The tax you pay will depend on your total taxable income and comes down to progressive tax rates. All that means is that higher incomes are hit with higher tax rates than those on lower incomes.<\/p>\n Allowable deductions will see your taxable income get lower, and reduce the amount of tax you have to pay. Think about things like:<\/p>\n Some payments, like child support, aren\u2019t considered income for tax purposes. They are neither assessable nor reportable on your tax return. However, government pensions and some other payments might be taxable or exempt, depending on the type of payment. Always check with your accountant or tax professional.<\/p>\n As your income goes up, you\u2019ll have to deal with the reality of paying more taxes because of our progressive tax system. Being careful with your tax planning and staying across all your available deductions and offsets will become increasingly important as your earnings grow.<\/p>\n Now that you know exactly what constitutes income, you can be much more effective at planning ahead and managing your financial and tax obligations for the future. Just remember to always consult with a tax professional or qualified accountant if you have specific questions or complex income scenarios \u2013 especially if tax time is fast approaching.<\/p>\n [\/et_pb_text][et_pb_text admin_label=”Related terms” _builder_version=”4.27.4″ header_2_font_size=”32px” header_2_font_size_tablet=”30px” header_2_font_size_phone=”26px” header_2_font_size_last_edited=”on|tablet” locked=”off” global_colors_info=”{}”]<\/p>\n See related terms<\/strong> <\/p>\n [\/et_pb_text][ba_social_share icon_bg=”#03002e” icon_padding=”10px|12px|10px|12px|true|true” layout=”classic” show_text=”off” btn_padding=”0px|0px|0px|0px|false|false” btn_bg_color=”RGBA(255,255,255,0)” _builder_version=”4.23″ _module_preset=”default” custom_margin=”50px||||false|false” custom_padding=”25px||||false|false” custom_css_before=” content: %22SHARE THIS%22;|| font-size: 16px;|| font-weight: 700;|| line-height: 22px;|| letter-spacing: 0em;|| text-align: center;|| color: #ff5447;|| margin-bottom: 10px;|| display: inline-flex;|| position: absolute;|| margin-top: 10px;” border_width_top_main=”1px” border_color_top_main=”#e4e4e4″ border_radii_icon=”on|5px|5px|5px|5px” global_colors_info=”{}” custom_css_before_last_edited=”off|desktop”][ba_social_share_child _builder_version=”4.23″ _module_preset=”default” global_colors_info=”{}”][\/ba_social_share_child][ba_social_share_child network_type=”facebook” _builder_version=”4.23″ _module_preset=”default” global_colors_info=”{}”][\/ba_social_share_child][ba_social_share_child network_type=”linkedin” _builder_version=”4.23″ _module_preset=”default” global_colors_info=”{}”][\/ba_social_share_child][ba_social_share_child network_type=”email” _builder_version=”4.23″ _module_preset=”default” global_colors_info=”{}”][\/ba_social_share_child][\/ba_social_share][\/et_pb_column][\/et_pb_row][\/et_pb_section]<\/p>\n","protected":false},"excerpt":{"rendered":" Whether you\u2019re running a business, working as a paid employee or earning money through various other means like being a sole trader, as an Australian taxpayer, you need to learn what constitutes income. So strap in, because our complete guide will break down exactly what defines \u2018income\u2019 while also highlighting a few important aspects like […]<\/p>\n","protected":false},"author":35,"featured_media":0,"menu_order":0,"template":"","format":"standard","meta":{"_et_pb_use_builder":"on","_et_pb_old_content":"","_et_gb_content_width":"","inline_featured_image":false,"_lmt_disableupdate":"no","_lmt_disable":"","footnotes":""},"class_list":["post-292917","glo","type-glo","status-publish","format-standard","hentry"],"yoast_head":"\nIncome definition<\/h2>\n
Types of income in Australia<\/h2>\n
Gross income<\/h3>\n
Net income<\/h3>\n
Taxable income<\/h3>\n
Assessable and exempt income<\/h2>\n
Assessable income<\/h3>\n
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Exempt income<\/h3>\n
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Non-assessable, non-exempt income<\/h3>\n
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Income from business activities<\/h2>\n
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Special considerations: Investment income<\/h2>\n
Reporting and paying tax<\/h2>\n
Deductions<\/h3>\n
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Child support and other payments<\/h3>\n
Income increases and tax implications<\/h2>\n
What are expenses?<\/a>
What is gross pay<\/a>
What is net income?<\/a><\/p>\n