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Exempt income not subject to tax?

Written by Fitzpatrick Group • Senior Accountant
Published on 19 Dec 2016

In Australia, there is a certain income that is not subject to tax.

It may be possible that you possess income that is not subject to tax. This means that it will not be included as part of your assessable income, however, it may be used to in other calculations for your tax return.

You will find that the treatment of this income will largely depend on the classification of the income. Your income will be classified as one of the following:

  • Exempt Income
  • Non-assessable non-exempt income
  • Other amounts that are not taxable


Exempt Income

Exempt income is amounts of money that you don’t need to pay tax for. You will find that this income may be taken into account when calculating tax losses of earlier income years that you can deduct and the adjustable taxable income of your dependents.

Of course, you may already be aware what income is exempt, but in case you don’t and are wondering, here is a list:

  • Certain Australian Government pensions, including the disability support pension paid by Centrelink to a person who is under age-pension age.
  • Certain Australian Government allowances and payments, including the carer allowance and the child care benefit.
  • Certain overseas pay and allowances for Australian Defence Force and Federal Police personnel.
  • Australian Government education payments, such as allowances for students under 16 years old.
  • Some scholarships, bursaries, grants and awards.


Non-assessable, non-exempt income

This type of income works in much the same way as tax-exempt income, with a difference that means the income will not affect your tax losses. However, it can still be taken into account for calculating your liability for Medicare levy surcharge, and adjustable taxable income of your dependents.

This type of income includes:

  • The tax-free component of an employment termination payment (ETP).
  • Genuine redundancy payments and early retirement scheme payments are shown as ‘Lump sum D’ amount on your payment summary.
  • Super co-contributions.


Other amounts that are not taxable

In general, you will find that you will not have to declare:

  • Rewards or small gifts such as cash birthday presents.*
  • Prizes you won in ordinary lotteries, such as lotto draws and raffles.
  • Prizes you won in game shows, unless you regularly receive appearance fees or game-show winnings.
  • Child support and spouse maintenance payments you receive.
*Gifts may be taxable if they are large amounts or you receive them as part of a business-like activity or in relation to your income-earning activities as an employee or contractor.
Source: ATO website,

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