They say that money makes the world go ‘round. Are you reporting all of yours?
If you work (and even sometimes if you don’t), you lodge a tax return. On this tax return, the ATO requires you to declare your income. And you do. But are you sure you’re declaring all that you should be? It’s easy to miss a number or two. To help make sure you don’t, we’ve compiled a list of all types of income that should be declared on your tax return. Let’s take a look.
Employment Income to Declare
This is simply the money you earn from working. You’ll need to report this income whether you are a part time or full time employee. This type of income includes all of the following:
- Salary and wages which include your normal pay, commissions, parental leave, etc.
- Allowances such as car, travel, clothing, jury attendance fees, etc.
- Lump sum payments which include payments when you leave a job and payments made in arrears for prior income years.
- Fringe benefits such as a low-cost loan or work car for private use provided by your employer.
- Super contributions that are made on your behalf by your employer.
Investment Income to Declare
Investments are important, not to mention expensive. You don’t want to leave these in the dust when preparing your tax return. These 5 types should be declared:
- Interest. Interest typically accrues on financial accounts, term deposits and foreign sources of income.
- Dividends. These are paid to you as money, shares, and other property. A company issuing shares to you will inform you of whether the issue is considered a dividend or not.
- Rent. This is to include the full amount of any rent and rent-related payments that you become entitled to or have received. That being said, you cannot declare defaulted rent unless it is in the form of an insurance payout or rental bond money.
- Managed investment funds. This would be any income or credits you received from an investment product.
- Capital gains. This amount is the difference between how much you paid for an asset and how much you sold it for.
Foreign Income to Declare
This can go one of two ways, depending on whether you are an Australian resident working in another country or an Australian non-resident working in Australia.
All Australian residents for tax purposes are taxed on their worldwide income and must report all income on their Australian tax return. This includes all of the following:
- Foreign employment income
- Foreign pensions and annuities
- Foreign business income
- Foreign investment income
- Capital gains on overseas assets
If you are a non-resident employed in Australia for the financial year, then you are only required to report your Australian income on your Australian tax return. The rules may be different for your resident country, so it is strongly recommended that you double check those as well.
Crowdfunding to Declare
Simply put, crowdfunding is the method of using the internet and/or social media to find supporters and raise money for a specific fund or endeavor. There are currently four different types of crowdfunding:
- Donation-based is when money is paid without expecting or receiving anything in return. The donation may just be acknowledged by the fundee.
- Reward-based occurs when the promoter gives the funders goods, services or rights in return for their payments. This could be in the form of a discount, merchandise, etc.
- Equity-based is when the promoter provides the funders with interest or shares of equity in return for their payments.
- Debt-based is slightly different in the sense that the funder loans money to the promoter who will then agree to pay back the loan interest.
Crowdfunding gets tricky when you consider where you will report the funds on your tax return. This can be determined once you’ve established what type of crowdfunding you’re dealing with (see the list provided above). If you’re having trouble, don’t hesitate to give our tax team a call so that we can address your specific situation.
Super Pensions, Annuities, Government Payments…OH MY!
You’re required to declare all pensions paid to you as income received, whether it’s a super income stream, government payments, or private annuities. These tend to become more confusing when declaring them on your tax return. Here’s why.
A pension is a series of payments made regularly and considered a super income stream. Your super income stream payments are broken down into three different segments; a taxed element, an un-taxed element and a tax-free element. Of these three, you only need to declare the following:
- The taxed element, which is the portion of your benefit on which tax has already been paid in the fund.
- The un-taxed element, which is the portion of your benefit that remains taxable because tax has not been paid in the fund.
An annuity is typically a series of payments made to you by a life insurance company in return for a lump sum payment. While annuities are also broken down into two different components, tax-free and taxable, only the latter must be declared.
Government payments must be declared on your tax return whether they are exempt from income tax or not. This is so that you can work out your eligibility for certain tax offsets and government benefits. Some of these payments include:
- Child disability allowance
- Carer adjustment payment
- Disability support pension (if you fall below the pension age)
- Veterans’ Affairs disability pensions/allowances
Business Income to Declare
When you are involved with carrying on a business, your net income earned is assessable and must be declared on your tax return. There are three specific types of business income:
- Income received as an individual running a business. This would require you to lodge a separate business schedule attached to your individual tax return.
- Income earned from a partnership. Although a partnership tax return must be lodged for any partnership, the partnership itself is not a separate taxable entity. The partners must each declare their share of the net income or loss on their own individual tax returns.
- Income earned from a trust. A trust acts like a partnership in the sense that it is not a separate taxable entity, and the trustee(s) are required to lodge a trust tax return on its behalf. Likewise, each beneficiary’s share of trust income must be declared on their individual tax return.
Other Income to Declare
With all of the above, we’ve left little to the imagination. The few stragglers that would also need to be declared on your tax return for the year are as follows:
- Compensation payments
- Insurance payments
- Prizes and awards
- Discounted shares under employee share schemes
Check out our new Pay Calculator!
With this calculator, you’ll be able to apply your total income, your pay structure and even other aspects such as your superannuation contributions, offsets and residency status to see your withholding amount and after tax income. The best part is it’s free to use and will only take a few minutes.
Image provided by flickr via Japanexperterna.Tags: crowdfunding, government payments, investment income, Super, Superannuation