Income tax is levied on the taxable income of a person or a business. It’s calculated on assessable income less any allowable deductions.

• Assessable income is generally income your business earns – it does not include GST payable on sales you make, or GST credits.
• Allowable deductions are deductions for certain expenses that you necessarily incur in relation to your business.

At the end of current year (30 June), most taxpayers need to file an annual tax return to tell ATO Australia has a self-assessment system, which means ATO accept the information taxpayers give on their tax return and other form to work out their tax obligation. ATO uses automatic identifier to verify some information and may later examine taxpayers return thoroughly.

Incomes which must declare are:

• Employment Income: A taxpayer must show entire employment income, payments and benefits on their tax returns, including salary and wages, allowance, perquisites and other employment income, lump sum payments, reportable fringe benefits and super contribution.
• Pensions, Annuities and other government payments: A taxpayer must show retirement income and some Australian government payments on tax return, including pension received from government as superannuation income stream, annuities taxpayers purchased with lump sum payments to life Insurance Company etc.
• Investment income: A taxpayer must show their investment income on their tax return, including taxpayer’s interest, their children’s saving accounts, life insurance bonuses, dividends they are paid as shareholder, rent and rent-related payments that taxpayers receive.
• Capital gains: A taxpayer must generally present capital gains on their tax return, including profits from selling any property (real estate), Shares and self-managed fund investment.
• Professional (business), partnership and trust income: A taxpayer’s must show business incomes on their tax return including they earn as a sole proprietor, partnership and trust income.
• Foreign income: If a taxpayer is an Australian resident for tax purpose, they are taxed on worldwide income, so they must explain any foreign income as well as Australian-source income on your tax return.

To exempt from tax income tax, some organization must pass one of three tests to be exempt. The tests are.

• Physical presence in Australia test.
• DGR TEST.
• Prescribed by law.

Following organization can self asses their income tax exempt status if they are also not charity.

• COMMUNITY SRVICE ORGANISATION
  COMMUNITY SERVICE: A not profit organization, association or club established for society service purpose except political or lobbying purpose. Conditions apply.

CULTURAL ORGANISATIONS
Art– A not profit organization, association or club established for the purpose of encouragement of art. Conditions apply.

Literature: A not profit organization, association or club established for the purpose of encouragement of literature. Conditions apply.

Music: A not profit organization, association or club established for the purpose of encouragement of music. Conditions apply.

Musical purposes: A not profit organization, association or club established for the purpose of encouragement of music purposes. Conditions apply.

• EDUCATIONAL ORGANISATIONS
  Public educational institutions – conditions apply.
• EMPLOYMENT ORGANISATIONS: registered or recognized under the fair work (Registered Organizations) Act 2009or an Australian law relating to the settlement of industrial disputes. Conditions apply.

  Employer organization: registered or recognized under the fair work (Registered Organizations) Act 2009or an Australian law relating to the settlement of industrial disputes. Conditions apply
  Trade union – conditions apply.

• HEALTHS ORGANISATIONS
  Public hospital – Conditions apply.

  NON profit hospital: a hospital runs by nonprofit organization, society or association. Conditions apply.

  Benefits organization: a non-profit organization that is private health insurer with the meaning of Private Health Insurance Act 2007. Conditions apply.

• RESOURCE DEVELOPMENT ORGANISATIONS
  • In resource development many activities are included for the exemption purposes. Activities are:
    • Agricultural resources
    • Aqua cultural resources
    • Aviation
    • Fishing resources
    • Horticultural resources
    • Industrial resources
    • Manufacturing resources
    • Pastoral resources
    • Tourism

  Any non-profit organization providing any above facility can self asses their income tax exempt status. Conditions apply.

• SPORTING ORGANISATIONS
  Animal racing: a non-profit organization or association established for the encouragement of animal racing. Conditions apply.
  Game or sport: a non-profit organization or association established for the encouragement of game or sport. Conditions apply.