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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

4-10(1)  

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You must pay income tax for each *financial year.

4-10(2)  

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.

4-10(3)  

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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.]

4-10(3A)  

(Repealed by No 58 of 2006)

Income tax worked out on another basis

4-10(4)  

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.


 



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