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Division 4 - How to work out the income tax payable on your taxable income  

SECTION 4-10  How to work out how much income tax you must pay  

 ITAA 36


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You must pay income tax for each *financial year.


Your income tax is worked out by reference to your taxable income for the income year . The income year is the same as the *financial year, except in these cases:

(a) for a company, the income year is the previous financial year;

(b) if you have an accounting period that is not the same as the financial year, each such accounting period or, for a company, each previous accounting period is an income year.
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Note 1:

The Commissioner can allow you to adopt an accounting period ending on a day other than 30 June. See section 18 of the Income Tax Assessment Act 1936 .

Note 2:

An accounting period ends, and a new accounting period starts, when a partnership becomes, or ceases to be, a VCLP, an ESVCLP, an AFOF or a VCMP. See section 18A of the Income Tax Assessment Act 1936 .


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Work out your income tax for the *financial year as follows:
Income tax   =   (Taxable income   ×   Rate)   -   Tax offsets

Method statement

Step 1. 

Work out your taxable income for the income year.

To do this, see section 4-15 .

Step 2. 

Work out your basic income tax liability on your taxable income using:

(a) the income tax rate or rates that apply to you for the income year; and
(b) any special provisions that apply to working out that liability.

See the Income Tax Rates Act 1986 and section 4-25 .

Step 3. 

Work out your tax offsets for the income year. A tax offset reduces the amount of income tax you have to pay.

For the list of tax offsets, see section 13-1 .

Step 4. 

Subtract your *tax offsets from your basic income tax liability. The result is how much income tax you owe for the *financial year.

Note 1:

Division 63 explains what happens if your tax offsets exceed your basic income tax liability. How the excess is treated depends on the type of tax offset.

Note 2:

Section 4-11 of the Income Tax (Transitional Provisions) Act 1997 (which is about the temporary budget repair levy) may increase the amount of income tax worked out under this section.

[ CCH Note: S 4-10(3) was amended by No 16 of 2011, s 3 and Sch 1 item 1, by substituting " Note 1 " for " Note " in the note at the end of the subsection. However, since Note 3 also appears at the end of s 4-10(3), " Note " has been renumbered as " Note 1 " and " Note 3 " has been renumbered to " Note 2 " , in line with an editorial change made by the Federal Register of Legislation under the Legislation Act 2003 to bring it into line with legislative drafting practice.]


(Repealed by No 58 of 2006 )

Income tax worked out on another basis


For some entities, some or all of their income tax for the * financial year is worked out by reference to something other than taxable income for the income year.

See section 9-5 .


This information is provided by CCH Australia Limited. View the disclaimer and notice of copyright.
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