Income on which you don’t pay tax

Amounts that you don’t pay tax on generally fall into three categories:

  • exempt income
  • non-assessable non-exempt income (“NANE”), and
  • other non-taxable amounts which don’t affect your tax return.

Because of the complexity of rules determining taxability of income and the potentially high penalties for getting things wrong, these listings should not be relied upon without qualified advice. Some items may be partially taxable. For Tax Office guidance call 132861.

Payments received under the National Redress Scheme for Institutional Child Sexual Abuse Act 2018

Taxation Determination TD 2018/16 – payments are not assessable or subject to capital gains tax. The determination applies from 1 July 2018.

Centrelink

Generally all Centrelink pensions, allowances and benefits are taxable except:

  • ABSTUDY supplementary benefits
  • ABSTUDY (if under 16)
  • Assistance for Isolated Children
  • Family Tax Benefit Part A and Part B
  • Carer Payment (where both carer and care receiver are under Age Pension age)
  • Carer Allowance
  • Crisis Payment
  • Disability Support Pension (if under Age Pension age)
  • Disability Wage Supplement (if under Age Pension age)
  • Double Orphan Pension
  • Fares Allowance
  • Living Away From Home Allowance
  • Baby Bonus
  • Maternity Immunisation Allowance
  • Mobility Allowance
  • Pharmaceutical Allowance
  • Pension Bonus Scheme
  • Pension Loan Scheme
  • Pensioner Education Supplement
  • Rehabilitation Allowance
  • Remote Area Allowance (offsets Zone Tax Rebate)
  • Rent Assistance
  • Student Financial Supplement Scheme (no longer available)
  • Telephone Allowance
  • Wife Pension for Disability Support Pension wives (if both partners under Age Pension age)
  • Youth Allowance (if under 16 and a student)
  • Youth Disability Supplement
  • see also – Exempt income
  • see also – Other Government payments

Exempt income

Exempt Australian Government pensions, allowances and payments – (always check annual statements for taxable elements). The following are exempt:

  • Carer adjustment payment (CAP) – Carer payment where both the carer and the care receivers are under age-pension age, or
    the carer is under age-pension age and any of the care receivers has died
  • Defence Force income support allowance (DFISA) payable to you on a day when the whole of your social security pension or benefit, which is also payable to you on that day, is exempt from income tax under section 52-10 of the Income Tax Assessment Act 1997
  • Disability support pension paid by Centrelink to a person who is under age-pension age
  • Double orphan pension
  • Invalidity service pension paid under the Veterans’ Entitlements Act 1986 where the veteran is under age-pension age
  • Partner service pension where either:
    • the partner (excluding the non-illness separated spouse of a veteran) and the veteran are under age-pension age and the veteran receives an invalidity service pension, or
    • the partner is under age-pension age and the veteran has died and was receiving an invalidity service pension at the time of death
  • Veterans’ Affairs disability pension and allowances, war widows and war widowers pension
  • Wife pension where both the recipient and their partner are under age-pension age, or the recipient is under age-pension age and their partner has died
  • Lump sum bereavement payments received as part of any of the payments in the previous column are exempt only up to the tax-free amount. Phone 13 28 61 to find out how much of your payment is exempt.

Education

The following are exempt:

  • Allowances for students under 16 years old, including those allowances paid under ABSTUDY, Youth Allowance, the Assistance for Isolated Children Scheme and the Veterans’ Children Education Scheme
  • The first $1,000 of an apprenticeship early completion bonus provided under a specified state or territory scheme for occupations with skill shortages
  • Australian-American Educational Foundation grant
  • Commonwealth scholarships or bursaries provided to foreign students
  • Commonwealth secondary education assistance
    Language, literacy and numeracy supplement
  • Endeavour awards research fellowships or an Endeavour Executive Award
  • Payments under the Military Rehabilitation and Compensation Act Education and Training Scheme for eligible young persons whose eligibility was determined under:
    • paragraph 258(1)(a) of the Military Rehabilitation and Compensation Act 2004 and the eligible young person was under 16 years old, or
    • paragraph 258(1)(b) of the Military Rehabilitation and Compensation Act 2004
      Pensioner education supplement and fares allowance paid by Centrelink
  • Rent assistance paid to Austudy recipients
  • Some scholarships and bursaries received by full-time students
  • Supplementary allowances for students paid under the Assistance for Isolated Children Scheme
  • Tools for your trade payment, paid under the Australian Apprenticeships Incentives Program
  • Certain pay and allowances for ADF personnel (your employer will advise you if an amount is
    exempt)
  •  Compensation payments for impairment or incapacity resulting from service with a United Nations armed force
  •  Compensation payments made under the Military Rehabilitation and Compensation Act 2004, except those that are income-related payments
  • Pay and allowances for part-time service in the Australian Naval, Army or Air Force Reserve
  • Some allowances paid to Australian Defence Force personnel who served in prescribed overseas areas (your
    employer will advise you if an allowance is exempt)
  • Payments under the Defence Abuse Reparation Scheme

Other Exempt Government payments

The following are exempt:

  • Australian Government disaster recovery payments
  • Baby bonus and stillborn baby payment paid by Centrelink
  • Carer allowance paid under the Social Security Act 1991
  • Child care benefit
  • Child care rebate
  • Child care subsidy (applies from 2 July 2018)
  • Child disability assistance under Part 2.19AA of the Social Security Act 1991
  • DFISA bonus and DFISA bonus bereavement payment under Part VIIAB of theVeterans’ Entitlements Act 1986
  • Family tax benefit
  • F-111 deseal/reseal ex-gratia lump sum payments
  • Household Assistance Package payments which include:
    • Clean Energy Advance
    • Clean Energy Supplement payments
    • Essential Medical Equipment payment
    • Low Income Supplement
    • Single Income Families Supplement
  • Job commitment bonus paid under the Social Security Act 1991
  • Loss of earnings allowance paid under the Veterans’ Entitlements Act 1986
  • Lump sum payment made under section 198N of the Veterans’ Entitlements Act 1986
  • Mobility allowance paid under the Social Security Act 1991
  • Economic security strategy payment to families under the A New Tax System (Family Assistance)(Administration) Act 1999 or under the scheme determined under Schedule 4 to the Social Security and Other Legislation Amendment (Economic Security Strategy) Act 2008
  • Economic security strategy payment under the Social Security Act 1991 or theVeterans’ Entitlements Act 1986 or under the scheme determined under Schedule 4 to the Social Security and Other Legislation Amendment (Economic Security Strategy) Act 2008
  • Back to school bonus and single income family bonus paid under the A New Tax System (Family Assistance) (Administration) Act 1999
  • Training and learning bonus under the Social Security Act 1991
  • Farmers hardship bonus under the Social Security Act 1991
  • Education entry payment supplement under the Social Security Act 1991
  • Payments under the scheme determined under Schedule 4 to the Household Stimulus Package Act (No 2) 2009
  • Income support bonus under the Social Security Act 1991
  • Income support bonus under the scheme prepared under Part VII of theVeterans’ Entitlements Act 1986
  • Income support bonus under the scheme determined under section 258 of theMilitary Rehabilitation and Compensation Act 2004
  • The ex-gratia payment from the Australian Government, known as assistance for New Zealand non-protected special category visa holders, for:
    • a disaster that occurred in Australia during 2011–12 or 2012–13, and
    • that the Emergency Management Minister has declared to be a major disaster for the purposes of the Australian Government Disaster Recovery Payment
  • The ex-gratia payment from the Australian Government, known as the Disaster Income Recovery Subsidy, for a disaster occurring during the period starting on 3 January 2013 and ending on 30 September 2013
  • Payment from the Thalidomide Australia Fixed Trust
  • Payments to carers under the scheme determined under Schedule 4 to theSocial Security and Veterans’ Entitlements Legislation Amendment (One-off Payments and Other Budget Measures) Act 2008
  • Pension bonus and pension bonus bereavement payments under Part 2.2A of the Social Security Act 1991 or Part IIIAB of the Veterans’ Entitlements Act 1986
  • Pharmaceutical allowances paid under the Social Security Act 1991
  • Phone allowance paid under the Social Security Act 1991
  • Quarterly pension supplement paid under the Social Security Act 1991 or theVeterans’ Entitlements Act 1986
  • Remote area allowance
  • Rent assistance
  • Schoolkids Bonus
    Seniors supplement paid under the Social Security Act 1991 or the Veterans’ Entitlements Act 1986
  • Sugar industry exit grant where you complied with the condition of the grant not to own or operate any agricultural business within five years after receiving the grant
  • Tobacco industry exit grant where you complied with the condition of the grant not to own or operate any agricultural business within five years after receiving the grant
  • Utilities allowance paid under the Social Security Act 1991
  • Veterans supplement paid under the Veterans’ Entitlements Act 1986
  • Outer Regional and Remote (OR&R) payment made under the Helping Children with Autism package
  • Outer Regional and Remote (OR&R) payment made under the Better Start for Children with Disability initiative
  • Prisoner of War Recognition Supplement payment under Part VIB of theVeterans’ Entitlements Act 1986
  • Amounts you received directly, or which are paid to a person on your behalf, under the National Disability Insurance Scheme for approved reasonable and necessary supports funded under your plan

Other exempt

  • Certain annuities and lump sums which are paid to an injured person under a structured settlement
  • Your share of certain profits or gains arising from disposal of investments by a venture capital limited partnership (VCLP), an early stage venture capital limited partnership (ESVCLP) or an Australian venture capital fund of funds (AFOF)
  • Certain distributions from an early stage venture capital limited partnership
  • Certain distributions from a pooled development fund
  • Certain payments relating to persecution during the Second World War
  • Certain profits or gains from disposal of shares in a pooled development fund
  • Japanese internment compensation payments made under the Compensation (Japanese Internment) Act 2001 or the Veterans’ Entitlements Act 1986
  • Certain amounts of interest paid by the Commonwealth on unclaimed money and property

Non-Assessable Non-Exempt Income

In general, non-assessable, non-exempt income (“NANE”) is not taxable and doesn’t affect tax losses. Some types of NANE may affect the calculations for Medicare levy surcharge and are taken into account when calculating the adjusted taxable income of dependants for various concessions.

Generally expenses incurred in gaining non-assessable, non-exempt income are not deductible.

The most common types of non-assessable non-exempt income are:

  • the tax-free component of an employment termination payment (ETP)
  • that part of the taxable component of a death benefit ETP below the low rate cap paid to a dependant
  • the tax-free component of a superannuation benefit
  • the taxed element of a superannuation income stream or lump sum received by a person 60 years old or older
  • the taxed element of a death benefit superannuation income stream paid to a death benefit dependant where
    the deceased was 60 years old or older at the time of their death, or the recipient was 60 years old or older when they received the benefit
  • a tax-free superannuation lump sum benefit paid to a person with a terminal medical condition existing at the time when the lump sum was received or within 90 days after its receipt
  • National Rental Affordability Scheme payments or non-cash benefits paid (whether directly or indirectly, such as through an NRAS consortium of which you are a member) by a state or territory government or a relevant body established under a state or territory law
  • a superannuation lump sum death benefit received by
    • a dependant, or
    • someone who is not a dependant but received the benefit because of the death of a member of the Australian Defence Force or
    • an Australian police force (including Australian Protective Services) who died in the line of duty
  • genuine redundancy payments and early retirement scheme payments shown as ‘Lump sum D’ amounts on your payment summary
  • amounts on which family trust distribution tax has been paid (see questionA4 Amount on which family trust distribution tax has been paid)
  • interest or other earnings credited to a first home saver account that you hold or a payment to you from such an account
  • government contributions paid under the First Home Saver Accounts Act 2008
  • government super contributions.

Temporary residents

If you are a temporary resident your foreign income is non-assessable non-exempt income, except income you earn from your employment overseas for short periods while you are a temporary resident.

You are a temporary resident if:

  • you hold a temporary visa granted under the Migration Act 1958
  • both you and your spouse are not Australian residents within the meaning of the Social Security Act 1991.

If, at any time on or after 6 April 2006, you have been an Australian resident for tax purposes but not a temporary resident, you will not be entitled to the temporary resident exemptions from that time, even if you later hold a temporary visa.

For further information, see Foreign income exemption for temporary residents – introduction.

Other non-taxable

 

ONE BIG LIST

  • ABSTUDY (if under 16)
  • ABSTUDY supplementary benefits
  • Allowances for students under 16 years old, including those allowances paid under ABSTUDY, Youth Allowance, the Assistance for Isolated Children Scheme and the Veterans’ Children Education Scheme
  • amounts on which family trust distribution tax has been paid (see questionA4 Amount on which family trust distribution tax has been paid)
  • Amounts you received directly, or which are paid to a person on your behalf, under the National Disability Insurance Scheme for approved reasonable and necessary supports funded under your plan
  • Assistance for Isolated Children
  • Australian Government disaster recovery payments
  • Australian-American Educational Foundation grant
  • Baby Bonus
  • Baby bonus and stillborn baby payment paid by Centrelink
  • Back to school bonus and single income family bonus paid under the A New Tax System (Family Assistance) (Administration) Act 1999
  • Carer adjustment payment (CAP)
  • Carer Allowance
  • Carer allowance paid under the Social Security Act 1991
  • Carer Payment (where both carer and care receiver are under Age Pension age)
  • Carer payment where both the carer and the care receivers are under age-pension age, or the carer is under age-pension age and any of the care receivers has died
  • Centrelink telephone allowance
  • Certain amounts of interest paid by the Commonwealth on unclaimed money and property
  • Certain annuities and lump sums which are paid to an injured person under a structured settlement
  • Certain distributions from a pooled development fund
  • Certain distributions from an early stage venture capital limited partnership
  • Certain pay and allowances for ADF personnel (your employer will advise you if an amount is
    exempt)
  • Certain payments relating to persecution during the Second World War
  • Certain profits or gains from disposal of shares in a pooled development fund
  • Child care benefit
  • Child care rebate
  • Child disability assistance under Part 2.19AA of the Social Security Act 1991
  •  Child support and spouse maintenance payments – most are tax free
  • Commonwealth scholarships or bursaries provided to foreign students
  • Commonwealth secondary education assistance Language, literacy and numeracy supplement
  •  Compensation payments for impairment or incapacity resulting from service with a United Nations armed force
  •  Compensation payments made under the Military Rehabilitation and Compensation Act 2004, except those that are income-related payments
  • Crisis Payment
  • Defence Force income support allowance (DFISA) payable to you on a day when the whole of your social security pension or benefit, which is also payable to you on that day, is exempt from income tax under section 52-10 of the Income Tax Assessment Act 1997
  • DFISA bonus and DFISA bonus bereavement payment under Part VIIAB of theVeterans’ Entitlements Act 1986
  • Disability Support Pension (if under Age Pension age)
  • Disability support pension paid by Centrelink to a person who is under age-pension age
  • Disability Wage Supplement (if under Age Pension age)
  • Double Orphan Pension
  • Double orphan pension
  • Economic security strategy payment to families under the A New Tax System (Family Assistance)(Administration) Act 1999 or under the scheme determined under Schedule 4 to the Social Security and Other Legislation Amendment (Economic Security Strategy) Act 2008
  • Economic security strategy payment under the Social Security Act 1991 or theVeterans’ Entitlements Act 1986 or under the scheme determined under Schedule 4 to the Social Security and Other Legislation Amendment (Economic Security Strategy) Act 2008
  • Education entry payment supplement under the Social Security Act 1991
  • Endeavour awards research fellowships or an Endeavour Executive Award
  • F-111 deseal/reseal ex-gratia lump sum payments
  • Family Tax Benefit Part A and Part B
  • Fares Allowance
  • Farmers hardship bonus under the Social Security Act 1991
  • genuine redundancy payments and early retirement scheme payments shown as ‘Lump sum D’ amounts on your payment summary
  • government contributions paid under the First Home Saver Accounts Act 2008
  • government super contributions.
  • Household Assistance Package payment Clean Energy Advance
  • Household Assistance Package payment Clean Energy Supplement payments
  • Household Assistance Package payment Essential Medical Equipment payment
  • Household Assistance Package payment Low Income Supplement
  • Household Assistance Package payment Single Income Families Supplement
  • Income support bonus under the scheme determined under section 258 of the Military Rehabilitation and Compensation Act 2004
  • Income support bonus under the scheme prepared under Part VII of theVeterans’ Entitlements Act 1986
  • Income support bonus under the Social Security Act 1991
  • interest or other earnings credited to a first home saver account that you hold or a payment to you from such an account
  • Invalidity service pension paid under the Veterans’ Entitlements Act 1986 where the veteran is under age-pension age
  • Japanese internment compensation payments made under the Compensation (Japanese Internment) Act 2001 or the Veterans’ Entitlements Act 1986
  • Job commitment bonus paid under the Social Security Act 1991
  • Living Away From Home Allowance
  • Loss of earnings allowance paid under the Veterans’ Entitlements Act 1986
  • Lump sum bereavement payments received as part of any of the payments in the previous column are exempt only up to the tax-free amount. Phone 13 28 61 to find out how much of your payment is exempt.
  • Lump sum payment made under section 198N of the Veterans’ Entitlements Act 1986
  • Maternity Immunisation Allowance
  • Mobility Allowance
  • Mobility allowance paid under the Social Security Act 1991
  • National Rental Affordability Scheme payments or non-cash benefits paid (whether directly or indirectly, such as through an NRAS consortium of which you are a member) by a state or territory government or a relevant body established under a state or territory law
  • Outer Regional and Remote (OR&R) payment made under the Better Start for Children with Disability initiative
  • Outer Regional and Remote (OR&R) payment made under the Helping Children with Autism package
  • Partner service pension where either the partner (excluding the non-illness separated spouse of a veteran) and the veteran are under age-pension age and the veteran receives an invalidity service pension, or the partner is under age-pension age and the veteran has died and was receiving an invalidity service pension at the time of death
  • Pay and allowances for part-time service in the Australian Naval, Army or Air Force Reserve
  • Payment from the Thalidomide Australia Fixed Trust
  • Payments to carers under the scheme determined under Schedule 4 to theSocial Security and Veterans’ Entitlements Legislation Amendment (One-off Payments and Other Budget Measures) Act 2008
  • Payments under the Defence Abuse Reparation Scheme
  • Payments under the Military Rehabilitation and Compensation Act Education and Training Scheme for eligible young persons whose eligibility was determined under paragraph 258(1)(a) of the Military Rehabilitation and Compensation Act 2004 and the eligible young person was under 16 years old, or paragraph 258(1)(b) of the Military Rehabilitation and Compensation Act 2004
    Pensioner education supplement and fares allowance paid by Centrelink
  • Payments under the scheme determined under Schedule 4 to the Household Stimulus Package Act (No 2) 2009
  • Pension bonus and pension bonus bereavement payments under Part 2.2A of the Social Security Act 1991 or Part IIIAB of the Veterans’ Entitlements Act 1986
  • Pension Bonus Scheme
  • Pension Loan Scheme
  • Pensioner Education Supplement
  • Pharmaceutical Allowance
  • Pharmaceutical allowances paid under the Social Security Act 1991
  • Phone allowance paid under the Social Security Act 1991
  • Prisoner of War Recognition Supplement payment under Part VIB of theVeterans’ Entitlements Act 1986
  • Quarterly pension supplement paid under the Social Security Act 1991 or theVeterans’ Entitlements Act 1986
  • Rehabilitation Allowance
  • Remote area allowance
  • Remote Area Allowance (offsets Zone Tax Rebate)
  • Rent Assistance – Centrelink
  • Rent assistance paid to Austudy recipients
  • Schoolkids Bonus
  • Seniors supplement paid under the Social Security Act 1991 or the Veterans’ Entitlements Act 1986
  • Some allowances paid to Australian Defence Force personnel who served in prescribed overseas areas (your employer will advise you if an allowance is exempt)
  • Some scholarships and bursaries received by full-time students
  • Student Financial Supplement Scheme (no longer available)
  • Sugar industry exit grant where you complied with the condition of the grant not to own or operate any agricultural business within five years after receiving the grant
  • Superannuation lump sum death benefit received by a dependant, or someone who is not a dependant but received the benefit because of the death of a member of the Australian Defence Force or an Australian police force (including Australian Protective Services) who died in the line of duty
  • Supplementary allowances for students paid under the Assistance for Isolated Children Scheme
  • Tax-free superannuation lump sum benefit paid to a person with a terminal medical condition existing at the time when the lump sum was received or within 90 days after its receipt
  • Temporary residents’ foreign income is non-assessable non-exempt income, except income you earn from your employment overseas for short periods while you are a temporary resident.
  • that part of the taxable component of a death benefit ETP below the low rate cap paid to a dependant
  • The ex-gratia payment from the Australian Government, known as assistance for New Zealand non-protected special category visa holders, for a disaster that occurred in Australia during 2011–12 or 2012–13, and that the Emergency Management Minister has declared to be a major disaster for the purposes of the Australian Government Disaster Recovery Payment
  • The ex-gratia payment from the Australian Government, known as the Disaster Income Recovery Subsidy, for a disaster occurring during the period starting on 3 January 2013 and ending on 30 September 2013
  • The first $1,000 of an apprenticeship early completion bonus provided under a specified state or territory scheme for occupations with skill shortages
  • the taxed element of a death benefit superannuation income stream paid to a death benefit dependant where the deceased was 60 years old or older at the time of their death, or the recipient was 60 years old or older when they received the benefit
  • Taxed element of a superannuation income stream or lump sum received by a person 60 years old or older
  • Tax-free component of a superannuation benefit
  • Tax-free component of an employment termination payment (ETP)
  • Tobacco industry exit grant where you complied with the condition of the grant not to own or operate any agricultural business within five years after receiving the grant
  • Tools for your trade payment, paid under the Australian Apprenticeships Incentives Program
  • Training and learning bonus under the Social Security Act 1991
  • Utilities allowance paid under the Social Security Act 1991
  • Veterans’ Affairs disability pension and allowances, war widows and war widowers pension
  • Veterans supplement paid under the Veterans’ Entitlements Act 1986
  • Wife Pension for Disability Support Pension wives (if both partners under Age Pension age)
  • Wife pension where both the recipient and their partner are under age-pension age, or the recipient is under age-pension age and their partner has died
  • Your share of certain profits or gains arising from disposal of investments by a venture capital limited partnership (VCLP), an early stage venture capital limited partnership (ESVCLP) or an Australian venture capital fund of funds (AFOF)
  • Youth Allowance (if under 16 and a student)
  • Youth Disability Supplement

 See also

 

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This page was last modified on 10 August 2015