INCOME TAX ASSESSMENT ACT 1997
|CHAPTER 1 - INTRODUCTION AND CORE PROVISIONS
|PART 1-3 - CORE PROVISIONS
|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
You must pay income tax for each *financial year.
S 4-10(1) substituted by No 97 of 2008, s 3 and Sch 3 item 46, effective 3 October 2008. S 4-10(1) formerly read:
4-10(1) You must pay income tax for each year ending on 30 June, called the 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.
| View history reference
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.
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.
S 4-10(2) amended by No 78 of 2007, s 3 and Sch 8 item 96, by inserting ", an ESVCLP" after "VCLP" in note 2, applicable to assessments for the 2007-2008 year of income and later years of income.
S 4-10(2) amended by No 136 of 2002.
Work out your income tax for the *financial year as follows:
|Income tax = (Taxable income × Rate) - Tax offsets|
Work out your taxable income for the income year.
To do this, see section 4-15.
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.
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.
Subtract your *tax offsets from your basic income tax liability. The result is how much income tax you owe for the *financial year.
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.
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.]
S 4-10(3) amended by No 16 of 2011, s 3 and Sch 2 items 1 and 2, by substituting "Note" for "Note 1" in note 1 and omitting note 2, effective 1 July 2016. Note 2 formerly read:
In addition to the income tax worked out under this section, you may also have to pay additional income tax (known as temporary flood and cyclone reconstruction levy) for the 2011-12 financial year. See section 4-10 of the Income Tax (Transitional Provisions) Act 1997.
S 4-10(3) amended by No 48 of 2014, s 3 and Sch 1 item 1, by inserting note 3, effective 25 June 2014.
S 4-10(3) amended by No 16 of 2011, s 3 and Sch 1 items 1 and 2, by substituting "Note 1" for "Note" in the note at the end and inserting note 2, effective 12 April 2011.
S 4-10(3) amended by No 58 of 2006, s 3 and Sch 7 item 53, by inserting the note at the end, effective 22 June 2006.
S 4-10(3) amended by No 58 of 2000, No 128, No 91 and No 46 of 1998.
(Repealed by No 58 of 2006)
S 4-10(3A) repealed by No 58 of 2006, s 3 and Sch 7 item 54, applicable to assessments for the 2006-07 income year and later income years. S 4-10(3A) formerly read:
Excess tax offsets
4-10(3A) If you have *tax offsets that are subject to the refundable tax offset rules and the total of those offsets exceeds your basic income tax liability, you can, after allowing certain other tax offsets, get a refund of the excess under section 67-30. If the total of your other tax offsets exceeds your basic income tax liability, you are not entitled to a refund or to offset the excess of your other tax offsets against any other liability.
However, some tax offsets can be carried forward to a later year. See, for example:
- · Division 65 of this Act, which deals with carrying forward excess tax offsets; and
- · section 160AFE of the Income Tax Assessment Act 1936, which deals with carrying forward excess foreign tax credits.
Division 67 sets out the refundable tax offset rules.
Amounts of tax offsets to which a corporate tax entity is entitled under Division 207 and Subdivision 210-H may in some circumstances be converted into an amount of a tax loss for the entity. See Subdivision 36-C.
S 4-10(3A) amended by No 142 of 2003, No 79 of 2000, No 58 of 2000 and inserted by No 128 of 1998.
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.