Tax Articles

Non commercial losses safe habour – natural disasters

Non commercial losses safe habour - natural disasters Where an individual, either alone or in a partnership, carries on a business activity, the non-commercial loss rules generally apply to prevent losses from non-commercial activities (ie where the outgoings or deductions exceeds the income) from being offset against income from other sources (ie salary and wages of the individual or other income). This is unless the activity satisfies one of the four commerciality tests, or the Commissioner...

Tax Deductions

Tax Deductions How do tax deductions work? The basic Australian income tax formula is: Tax rate x taxable income = tax payable. Taxable income = assessable income less deductions. So, tax deductions reduce tax payable in an indirect way. Example:John’s tax rate is 30% and his assessable income is $100,000 and his deductions are $10,000.John’s taxable income is $100,000 less $10,000 = $90,000. John’s tax payable before tax deductions is 30% x $100,000 = $30,000.John’s tax payable after tax...

Tax Refund & Tax Payable

Tax Refund & Tax Payable How does a tax refund or tax payable happen? The basic tax refund formula is: Tax withheld less tax payable = tax refund. Example:John’s employer withholds $32,000 of tax from his pay.John’s tax payable is $30,000.John’s tax refund is tax withheld ($32,000) less tax payable ($30,000) = $2,000 The amount of tax withheld by an employer usually affects the size of a tax refund more than tax deductions. Why? Because every dollar of tax withheld affects the size of the...