Personal income

Date

2.2 Tax expenditures

A. Personal income

A1 Deduction for expenses incurred by election candidates

General public services — Legislative and executive affairs ($m)
2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19
1 2 4 4 3 3 3 4
Tax expenditure type: Deduction 2014 TES code: A1
Estimate Reliability: Medium    
Commencement date: Introduced before 1985 Expiry date:  
Legislative reference: Sections 25-60, 25-65 and 25-70 of the Income Tax Assessment Act 1997

Certain expenses incurred by candidates contesting federal, state and territory government elections are tax deductible, irrespective of whether they are successful or not. For local government elections, candidates can deduct expenses of up to $1,000 per election.

A2 Exemption of certain income earned by Australians working overseas

General public services — Foreign affairs and economic aid ($m)
2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19
65 60 50 50 50 45 45 45
Tax expenditure type: Exemption 2014 TES code: A2
Estimate Reliability: Medium    
Commencement date: Introduced before 1985 Expiry date:  
Legislative reference: Sections 23AF and 23AG of the Income Tax Assessment Act 1936

Income earned by Australians working overseas for a continuous period of 91 days or more may be exempt from income tax if they are employed to work on certain approved overseas projects or if their foreign employment is directly attributable to:

  • the delivery of Australia’s overseas aid program by the individual’s employer (from 1 July 2016, Australian government employees will be ineligible for this exemption);
  • the activities of the individual’s employer in operating a developing country relief fund or a public disaster relief fund;
  • the activities of the individual’s employer being a prescribed institution that is exempt from Australian income tax;
  • the individual’s deployment outside Australia by an Australian government (or an authority thereof) as a member of a disciplined force; or
  • an activity of a kind specified in the regulations.

This exemption may not apply where the foreign earnings are exempt from income tax in the foreign country.

A3 Exemption of income of certain visitors to Australia

General public services — Foreign affairs and economic aid ($m)
2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19
* * * * * * * *
Tax expenditure type: Exemption 2014 TES code: A3
Estimate Reliability: Not Applicable * Category 1+
Commencement date: Introduced before 1985 Expiry date:  
Legislative reference: Sections 842-105 and 768-100 of the Income Tax Assessment Act 1997

The Australian-sourced income of certain visitors to Australia (for example, visiting foreign government representatives and their entourages) is exempt from income tax. In addition, the official salary and foreign-sourced income of, for example, foreign government representatives visiting Australia when the Vienna Conventions on Consular or Diplomatic Relations do not apply, are exempt from income tax where their home countries provide a reciprocal exemption.

A4 Exemption of official remuneration of officials of prescribed international organisations

General public services — Foreign affairs and economic aid ($m)
2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19
* * * * * * * *
Tax expenditure type: Exemption 2014 TES code: A4
Estimate Reliability: Not Applicable * Category 2+
Commencement date: Introduced before 1985 Expiry date:  
Legislative reference: International Organisations (Privileges and Immunities) Act 1963

The official remuneration of officials of prescribed international organisations (such as the OECD) may be exempt from income tax as part of the privileges and immunities required under the terms of certain international agreements.

A5 Exemption from income tax and the Medicare levy for residents of Norfolk Island

General public services — General services ($m)
2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19
6 6 7 7 7 .. .. ..
Tax expenditure type: Exemption 2014 TES code: A5
Estimate Reliability: Low    
Commencement date: Introduced before 1985 Expiry date: 30 Jun 2016
Legislative reference: Division 1A of Part III and Sections 251T and 251U of the Income Tax Assessment Act 1936

Income earned by res
idents of Norfolk Island is exempt from income tax and the Medicare levy. This exemption will cease from 1 July 2016; except on assets acquired by Norfolk Island residents before 24 October 2015, which will remain exempt from capital gains tax.

A6 Medicare levy exemption for current and veteran Australian Defence Force personnel and their relatives and associates

Defence ($m)
2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19
50 55 55 75 80 80 80 85
Tax expenditure type: Exemption 2014 TES code: A12
Estimate Reliability: Medium — High    
Commencement date: Introduced before 1985 Expiry date:  
Legislative reference: Sections 251T and 251U of the Income Tax Assessment Act 1936

A Medicare levy exemption applies to income earned by current and veteran Australian Defence Force personnel and certain others, for example, relatives of ADF personnel who are entitled to free medical treatment.

A7 Australian Defence Force personnel — exemption of certain allowances

Defence ($m)
2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19
85 85 85 55 35 35 40 40
Tax expenditure type: Exemption 2014 TES code: A6
Estimate Reliability: Medium    
Commencement date: Introduced before 1985 Expiry date:  
Legislative reference: Section 51-5 of the Income Tax Assessment Act 1997
Regulation 51-5.01 of the Income Tax Assessment Regulations 1997

Certain allowances payable to Australian Defence Force personnel are exempt from income tax. These include separation allowance, disturbance allowance, transfer allowance, deployment allowance and prescribed parts of rent allowance.

A8 Australian Defence Force personnel — exemption of compensation for lost deployment allowance

Defence ($m)
2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19
1 1 1 .. * * * *
Tax expenditure type: Exemption 2014 TES code: A7
Estimate Reliability: Medium * Category 1+
Commencement date: 1996 Expiry date:  
Legislative reference: Sections 51-5 and 51-32 of the Income Tax Assessment Act 1997

Australian Defence Force personnel may receive compensation for the loss of deployment allowance where the deployment allowance ceases to be paid upon repatriation to Australia due to injuries sustained in a warlike situation. Such compensation payments are exempt from income tax.

A9 Australian Defence Force personnel — exemption of pay and allowances earned while on eligible overseas duty

Defence ($m)
2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19
95 95 65 55 * * * *
Tax expenditure type: Exemption 2014 TES code: A8
Estimate Reliability: Medium * Category 2+
Commencement date: Introduced before 1985 Expiry date:  
Legislative reference: Section 23AD of the Income Tax Assessment Act 1936

Base pay and allowances made to Australian Defence Force personnel while on eligible overseas duty are exempt from income tax (provided they are not exempt from income tax under another provision of the income tax law).

A10 Australian Defence Force personnel — exemption of pay and allowances for part-time personnel

Defence ($m)
2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19
60 60 65 75 75 75 75 75
Tax expenditure type: Exemption 2014 TES code: A9
Estimate Reliability: Medium    
Commencement date: Introduced before 1985 Expiry date:  
Legislative reference: Section 51-5 of the Income Tax Assessment Act 1997

The pay and allowances of part-time Australian Defence Force Reserve personnel are exempt from income tax.

A11 Australian Defence Force Reserve personnel — exemption of compensation for loss of pay and allowances

Defence ($m)
2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19
.. .. .. .. .. .. .. ..
Tax expenditure type: Exemption 2014 TES code: A10
Estimate Reliability: Medium    
Commencement date: Introduced before 1985 Expiry date:  
Legislative reference: Sections 51-5 and 51-33 of the Income Tax Assessment Act 1997

Australian Defence Force Reserve personnel not engaged in continuous full-time service who are forced to resign due to injuries sustained while employed by the Reserves may receive compensation for the loss of pay and allowances. Such compensation payments are exempt from income tax.

A12 Exemption of some payments to Australian Federal Police and civilian personnel on service with an armed force of the United Nations

Defence ($m)
2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19
.. .. .. .. .. .. .. ..
Tax expenditure type: Exemption 2014 TES code: A11
Estimate Reliability: Very Low    
Commencement date: Introduced before 1985 Expiry date:  
Legislative reference: Section 23AB of the Income Tax Assessment Act 1936

Australian Federal Police and civilian personnel contributed by Australia to a United Nations armed force may receive compensation for death, impairment or incapacity resulting from their service. Such payments are exempt from income tax. Associated payments, including to the estate of a deceased civilian, may also receive tax relief.

A13 Tax offsets for Australian Defence Force personnel serving overseas and for Australian Federal Police and civilians serving with United Nations forces

Defence ($m)
2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19
Included in A38
Tax expenditure type: Offset 2014 TES code: A13
Estimate Reliability:      
Commencement date: Introduced before 1985 Expiry date:  
Legislative reference: Sections 79B and 23AB(7) of the Income Tax Assessment Act 1936

Australian Defence Force personnel who serve overseas in a locality specified by the Minister (because of its isolation and uncongenial nature), as well as civilian and Australian Federal Police personnel contributed by Australia to an armed force of the United Nations, may be eligible for a tax offset. The offset includes additional entitlements for individuals who maintain dependants.

A14 Denial of deductibility for HECS-HELP expenses

Education ($m)
2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19
* * * * * * * *
Tax expenditure type: Denial of deduction 2014 TES code: A14
Estimate Reliability: Not Applicable * Category 3-
Commencement date: 1997 Expiry date:  
Legislative reference: Section 26-20 of the Income Tax Assessment Act 1997

Course fees and repayments for a Higher Education Contribution Scheme Higher Education Loan Program (HECS-HELP) place funded by the individual and some other loan schemes are not tax deductible, even for the proportion that relates to income earning activities.

A15 Exemption of income from certain educational scholarships, payments to apprentices or similar forms of assistance

Education ($m)
2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19
* * * * * * * *
Tax expenditure type: Exemption 2014 TES code: A15
Estimate Reliability: Not Applicable * Category 2+
Commencement date: Introduced before 1985 Expiry date:  
Legislative reference: Sections 51-10, 51-35, 51-40, 51-42 and 842-105 of the Income Tax Assessment Act 1997

Scholarships and other education allowances paid to full-time students at a school, college or university may be exempt from income tax. Income derived as part of an Australian Government scheme to assist secondary education or the education of isolated children is exempt from income tax (excluding federal education, training or education entry payments provided under the Social Security Act 1991). A number of other exempt educational payments are listed in the Income Tax Assessment Act 1997.

A16 Threshold for the deductibility of self-education expenses

Education ($m)
2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19
-12 -12 -12 -12 -13 -13 -13 -13
Tax expenditure type: Denial of deduction 2014 TES code: A16
Estimate Reliability: Low    
Commencement date: Introduced before 1985 Expiry date:  
Legislative reference: Section 82A of the Income Tax Assessment Act 1936

Self-education expenses for the purpose of maintaining or improving skills or knowledge which the taxpayer uses in income earning activities are deductible. In certain circumstances taxpayers are not able to claim a deduction for the first $250
of an education expense. However, taxpayers can use certain other self-education expenses that are non-deductible, such as child care costs, to reduce the $250 no-claim threshold.

A17 Exemption of the Private Health Insurance Rebate

Health ($m)
2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19
1,330 1,600 1,470 1,450 1,510 1,610 1,690 1,770
Tax expenditure type: Exemption 2014 TES code: A17
Estimate Reliability: Medium    
Commencement date: 1998 Expiry date:  
Legislative reference: Subdivision 61-G of the Income Tax Assessment Act 1997. Part 2-2 of the Private Health Insurance Act 2007

The Private Health Insurance Rebate is exempt from income tax.

A18 Medicare levy exemption for blind pensioners, sickness allowance recipients and foreign government representatives

Health ($m)
2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19
150 175 190 280 310 345 365 380
Tax expenditure type: Exemption 2014 TES code: A18
Estimate Reliability: Medium — High    
Commencement date: Introduced before 1985 Expiry date:  
Legislative reference: Sections 251T and 251U of the Income Tax Assessment Act 1936

The income of certain prescribed persons is exempt from the Medicare levy. The list of prescribed persons includes recipients of specified payments made under the Social Security Act 1991 and foreign government representatives.

A19 Medicare levy exemption for residents with taxable income below the low-income thresholds

Health ($m)
2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19
1,200 1,220 1,270 1,710 1,880 1,960 2,040 2,130
Tax expenditure type: Exemption 2014 TES code: A19
Estimate Reliability: Medium    
Commencement date: 1986 Expiry date:  
Legislative reference: Section 7 of the Medicare Levy Act 1986

Residents whose taxable income falls below prescribed thresholds are exempt from the Medicare levy, with the levy phased in once their income exceeds these thresholds. Different thresholds apply for individuals, families with children and seniors and pensioners.

A20 Medicare levy surcharge

Health ($m)
2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19
-220 -240 -260 -250 -250 -260 -260 -270
Tax expenditure type: Increased rate 2014 TES code: A20
Estimate Reliability: Medium    
Commencement date: 1997 Expiry date:  
Legislative reference: Sections 8B to 8D of the Medicare Levy Act 1986
A New Tax System (Medicare Levy Surcharge — Fringe Benefits) Act 1999

Individuals and couples who do not have a specified level of private health insurance and whose income exceeds certain thresholds are subject to an increased Medicare levy, known as the Medicare levy surcharge.

A21 Medicare levy surcharge lump sum payment in arrears tax offset

Health ($m)
2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19
.. .. .. .. .. .. .. ..
Tax expenditure type: Offset 2014 TES code: A21
Estimate Reliability: High    
Commencement date: 1 July 2005 Expiry date:  
Legislative reference: Subdivision 61L of the Income Tax Assessment Act 1997

Eligible taxpayers who incur a Medicare levy surcharge liability, or an increased liability, as a result of certain lump sum payments in arrears, for example, a Commonwealth education payment, receive concessional treatment in respect of their surcharge liability.

A22 Net medical expenses tax offset

This offset provides taxpayers with income below the Medicare levy surcharge thresholds with a 20 per cent offset for eligible out-of-pocket medical expenses. This offset is currently being phased out, with transitional arrangements for certain medical expenses.

A23 Exemption for National Disability Insurance Scheme amounts

Health ($m)
2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19
510 540 390 230 145 20 15 15
Tax expenditure type: Offset 2014 TES code: A22
Estimate Reliability: Medium    
Commencement date: Introduced before 1985 Expiry date: 1 July 2019
Legislative reference: Section 159P of the Income Tax Assessment Act 1936
Social security and welfare ($m)
2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19
- - - 20 50 320 870 1,750
Tax expenditure type: Exemption 2014 TES code: A24
Estimate Reliability: Very Low    
Commencement date: 1 July 2013 Expiry date:  
Legislative reference: Sections 26-100; 40-235; and 52-180 of the Income Tax Assessment Act 1997

Payments and benefits provided under the National Disability Insurance Scheme (NDIS), whether directly or otherwise, to NDIS participants for approved reasonable and necessary supports are exempt from income tax.

A24 Exemption of Child Care Assistance payments

Social security and welfare ($m)
2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19
735 815 1,010 1,225 1,390 1,550 2,185 2,210
Tax expenditure type: Exemption 2014 TES code: A26 and A37
Estimate Reliability: Medium    
Commencement date: 1 July 2007 Expiry date:  
Legislative reference: Section 52-150 of the Income Tax Assessment Act 1997

The Child Care Rebate and Child Care Benefit are exempt from income tax.

From 1 July 2017, a new single Child Care subsidy will be introduced, subject to the passage of legislation. The Child Care Subsidy will replace the current child care fee assistance provided by Child Care Benefit and Child Care Rebate payments which will cease on 30 June 2017. The Child Care Subsidy is exempt from income tax.

A25 Exemption of disaster relief payments

Social security and welfare ($m)
2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19
25 70 5 15 * * * *
Tax expenditure type: Exemption 2014 TES code: A25
Estimate Reliability: Medium * Category 2+
Commencement date: 1 July 2008 Expiry date:  
Legislative reference: Section 51-30 of the Income Tax Assessment Act 1997

Certain payments made to victims of natural disasters, such as Disaster Income Recovery Subsidy payments, are exempt from income tax.

A26 Exemption of the Schoolkids Bonus

Social security and welfare ($m)
2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19
- 320 170 320 280 260 140 10
Tax expenditure type: Exemption 2014 TES code: A27
Estimate Reliability: Medium    
Commencement date: 2012 Expiry date: 31 Dec 2016
Legislative reference: Section 52-150 of the Income Tax Assessment Act 1997

The Schoolkids Bonus is exempt from income tax. It has been abolished with the last instalment to be paid in July 2016.

A27 Beneficiary and Pensioner Tax Offsets

Social security and welfare ($m)
2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19
290 280 40 60 75 80 80 80
Tax expenditure type: Offset 2014 TES code: A28
Estimate Reliability: Medium    
Commencement date: Introduced before 1985 Expiry date:  
Legislative reference: Section 160AAA of the Income Tax Assessment Act 1936

Taxpayers who receive certain social security benefits and allowances may be eligible for the Beneficiary Tax Offset, which ensures that people whose only income during the year is from the benefit or allowance will not pay any tax.

Prior to 2012-13, this tax expenditure included the Pensioner Tax Offset, which may be claimed by taxpayers who receive a qualifying government taxable pension such as Parenting Payment Single.

A28 Dependency tax offsets

Social security and welfare ($m)
2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19
500 370 140 120 10 10 10 10
Tax expenditure type: Offset 2014 TES code: A29
Estimate Reliability: Low    
Commencement date: Introduced before 1985 Expiry date:  
Legislative reference: Subdivision 61-A of the Income Tax Assessment Act 1936

Taxpayers who maintain a dependant unable to work due to carer obligations or disability may receive a tax offset to reduce their income tax liability.

A range of dependency tax offsets, including the dependent spouse tax offset and the invalid relative, parent, parent-in-law, housekeeper, housekeeper (with child), child-housekeeper and child-housekeeper (with child) tax offsets, were abolished from 1 July 2014.

A29 Release from particular tax liabilities in cases of serious hardship

Social security and welfare ($m)
2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19
61 62 53 40 * * * *
Tax expenditure type: Exemption 2014 TES code: A30
Estimate Reliability: High * Category 2+
Commencement date: 2003 Expiry date:  
Legislative reference: Division 340 in Schedule 1 to the Tax Administration Act 1953
Bill No 67 of 2003 (TSLAB 6 2003)

An individual taxpayer can be released from a tax liability where payment of the liability would cause serious hardship. This release from tax liability acts like a tax exemption.

A30 Seniors and pensioners tax offset

Social security and welfare ($m)
2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19
1,190 680 760 730 720 720 720 720
Tax expenditure type: Offset 2014 TES code: A31
Estimate Reliability: Medium    
Commencement date: 1996 Expiry date:  
Legislative reference: Sections 160AAAA and 160AAAB of the Income Tax Assessment Act 1936

The seniors and pensioners tax offset is available to taxpayers who receive certain taxable pensions and payments, for example, the Age Pension and the Defence Force Income Support Allowance. It is also available to taxpayers who are of Age Pension age but who do not receive the Age Pension because of the income or assets tests.

A31 Seasonal Labour Mobility Program

Other economic affairs — Total labour and employment affairs ($m)
2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19
- 1 1 2 2 3 3 3
Tax expenditure type: Concessional rate 2014 TES code: A33
Estimate Reliability: Medium — Low    
Commencement date: 1 July 2012 Expiry date:  
Legislative reference: Schedule 7 of the Income Tax Rates Act 1986

Non-resident workers employed under the Seasonal Labour Mobility Program are subject to a final withholding tax of 15 per cent (the lowest marginal tax rate applying to other non-resident workers is 29 per cent).

A32 Foreign income exemption for temporary residents

Other economic affairs — Other economic affairs, nec ($m)
2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19
40 40 45 55 60 65 65 65
Tax expenditure type: Exemption 2014 TES code: A34
Estimate Reliability: Low    
Commencement date: 1 July 2006 Expiry date:  
Legislative reference: Subdivision 768-R of the Income Tax Assessment Act 1997

The majority of foreign source income of temporary residents is exempt from income tax, and capital gains on only some Australian assets of temporary residents are taxed. Interest paid to foreign lenders by temporary residents is exempt from withholding tax.

A33 Income tax exemption for Australian staff of the Asian Development Bank

Other economic affairs — Other economic affairs, nec ($m)
2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19
1 1 1 1 1 1 1 1
Tax expenditure type: Exemption 2014 TES code: A35
Estimate Reliability: Medium — Low    
Commencement date: 17 September 2005 Expiry date:  
Legislative reference: Regulation 6 of the Asian Development Bank (Privileges and Immunities) Regulations 1967

The income of Australian resident officers of the Asian Development Bank (ADB) is exempt from tax. This exemption is part of the broader arrangement with the ADB that facilitates the day-to-day running of the Australian office which services the needs of the Pacific Island countries.

A34 Exemption of certain income support benefits, pensions or allowances

Social security and welfare ($m)
2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19
880 500 550 570 580 620 650 660
Tax expenditure type: Exemption 2014 TES code: A36
Estimate Reliability: Low    
Commencement date: Introduced before 1985 Expiry date:  
Legislative reference: Subdivisions 52-A, 52-E and 52-F of the Income Tax Assessment Act 1997

Certain social security payments are partly or fully exempt from income tax. These include: certain pensions; benefits; allowances; repatriation pensions paid under the Social Security Act 1991 and the National Health Act 1953, for example, Disability Support Pension and Carer Payment; certain amounts of Commonwealth education or training payment; and certain parts of payments under the ABSTUDY scheme.

A35 Exemption of Family Tax Benefit payments

Social security and welfare ($m)
2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19
1,950 1,990 2,090 2,180 2,250 2,220 2,220 2,230
Tax expenditure type: Exemption 2014 TES code: A38
Estimate Reliability: Medium    
Commencement date: 2000 Expiry date:  
Legislative reference: Section 52-150 of the Income Tax Assessment Act 1997

Family Tax Benefit payments are exempt from income tax.

A36 Exemptions of certain veterans’ pensions, allowances or benefits, compensation, and particular World War II-related payments for persecution

Social security and welfare ($m)
2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19
450 400 440 430 410 400 390 380
Tax expenditure type: Exemption 2014 TES code: A39
Estimate Reliability: Medium    
Commencement date: Introduced before 1985 Expiry date:  
Legislative reference: Subdivisions 52-B and 52-C and Section 768-105 of the Income Tax Assessment Act 1997

Repatriation pensions, certain payments under the Veterans Entitlements Act 1985 and Military Rehabilitation and Compensation Act 2004, payments under the Australian Participants in British Nuclear Tests (Treatment) 2006, certain foreign source World War II payments and compensation provided for legal advice to beneficiaries under the Military Rehabilitation and Compensation Act 2004 are wholly or partly exempt from income tax.

A37 Exemption of payments made under the First Home Owners Grant Scheme

Housing and community amenities ($m)
2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19
260 290 275 185 215 185 175 180
Tax expenditure type: Exemption 2014 TES code: A41
Estimate Reliability: Medium — Low    
Commencement date: 2000 Expiry date: 2016
Legislative reference: A New Tax System (Commonwealth State Financial Arrangements) Act 1999
Appendix A, Intergovernmental Agreement on Federal Financial Relations Appropriation
(Economic Security Strategy) Act (No. 2) 2008-09 and relevant state legislation.

Payments made under the First Home Owners Grant Scheme are exempt from tax.

A38 Zone tax offsets

Housing and community amenities ($m)
2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19
250 275 295 305 305 210 220 230
Tax expenditure type: Offset 2014 TES code: A43
Estimate Reliability: Medium    
Commencement date: Introduced before 1985 Expiry date:  
Legislative reference: Section 79A of the Income Tax Assessment Act 1936

Note: estimates include tax expenditures A38 and A13

Taxpayers who live in prescribed remote areas of Australia are eligible for a tax offset. Eligibility and the amount of the tax offsets varies depending on the taxpayer’s location.

From 1 July 2015, ‘fly-in fly-out’ workers whose normal residence is not in a zone are excluded from the offset. If their normal residence is in a different zone to the one in which they work, they receive the offset applicable to the zone in which they reside.

A39 Income averaging for authors, inventors, performing artists, production associates and sportspersons

Recreation and culture ($m)
2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19
18 23 26 29 31 34 36 39
Tax expenditure type: Concessional rate 2014 TES code: A44
Estimate Reliability: Medium — High    
Commencement date: 1998 Expiry date:  
Legislative reference: Division 405 of the Income Tax Assessment Act 1997

Authors, composers, artists, inventors, performing artists, production associates and sportspersons, whose income can fluctuate significantly between income years, may be eligible for an income averaging scheme that reduces their overall tax liability.

A40 Income tax exemption of certain Prime Minister’s prizes

Recreation and culture ($m)
2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19
.. .. .. .. .. .. .. ..
Tax expenditure type: Exemption 2014 TES code: A45
Estimate Reliability: High    
Commencement date: 1 July 2006 Expiry date:  
Legislative reference: Section 51-60 of the Income Tax Assessment Act 1997

The Prime Minister’s Prizes for Australian History and Science, and the Prime Minister’s Literary Award are exempt from income tax.

A41 Non-commercial losses deductions allowed for certain taxpayers with an adjusted taxable income under $250,000

Other economic affairs — Total labour and employment affairs ($m)
2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19
* * * * * * * *
Tax expenditure type: Deduction 2014 TES code: A47
Estimate Reliability: Not Applicable * Category 3+
Commencement date: 1 July 2000 Expiry date:  
Legislative reference: Division 35 of the Income Tax Assessment Act 1997

Individuals carrying on a business and who have an adjusted taxable income of less than $250,000 may apply losses from a business activity against their other assessable income in that year if they satisfy one of four statutory tests in that year.

This treatment results in some business activities that are non-commercial in nature being treated as commercial. Allowing losses from these activities to be offset against other assessable income in these circumstances gives rise to a tax expenditure.

A42 Non-commercial losses exception rules for primary producers and artists

Other economic affairs — Total labour and employment affairs ($m)
2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19
25 25 20 15 15 15 15 15
Tax expenditure type: Exemption 2014 TES code: A48
Estimate Reliability: Medium    
Commencement date: 1 January 2000 Expiry date:  
Legislative reference: Subsection 35-10(4) of the Income Tax Assessment Act 1997

The non-commercial losses rules prevent individuals carrying on unprofitable business activities claiming deductions for losses arising from such activities against their other income. Where a business’ activity is objectively determined to be commercial in nature, the Commissioner of Taxation allows the taxpayer to apply those losses against their other income.

Individuals that carry on a primary production or professional arts business, who have income from other sources of less than $40,000 (except net capital gains), are exempt from the non-commercial losses provisions.

A proportion of individuals carrying on primary production or professional arts businesses that access this exemption and apply losses from their business activity against their other income will nonetheless be carrying on an uncommercial business activity.

A43 Tax concessions for employee share schemes income

Other economic affairs — Total labour and employment affairs ($m)
2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19
* * * * * * * *
Tax expenditure type: Exemption, Deferral 2014 TES code: A46
Estimate Reliability: Not Applicable * Category 3+
Commencement date: 1995 Expiry date:  
Legislative reference: Former section 26AAC and Division 13A of the Income Tax Assessment Act 1936
Division 83A of the Income Tax Assessment Act 1997

Discounts on shares and rights acquired under an employee share scheme are generally included in a taxpayer’s assessable income in the year the shares or rights are acquired. However, there are a range of concessions available. An upfront tax exemption of $1,000 for eligible schemes is available to taxpayers earning less than $180,000 and a deferral of tax is available where there is a ‘real risk of forfeiture’.

On 1 July 2015, additional tax concessions for employee share schemes took effect. The taxing point for rights now generally occurs when the rights are exercised (converted to shares). There is also a tax deferral (for rights) or exemption (for shares) on the discount component of employee share schemes provided at a small discount to employees of eligible start-up companies.

A44 Tax deferral advantage arising from personal after-tax contributions to a pension or annuity

Other economic affairs — Total labour and employment affairs ($m)
2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19
* * * * * * * *
Tax expenditure type: Deferral 2014 TES code: A49
Estimate Reliability: Not Applicable * Category 2+
Commencement date: Introduced before 1985 Expiry date:  
Legislative reference: Section 27H of the Income Tax Assessment Act 1936

The value of a pension or annuity may consist in part of contributions made from the recipient’s after-tax income. This part of the income stream is not taxed again when it is returned in the form of pension or annuity payments. A tax expenditure arises because this part of the pension or annuity is apportioned evenly over the term of the income stream, providing a tax deferral advantage.

A45 Union dues and subscriptions to business associations deduction

Other economic affairs — Total labour and employment affairs ($m)
2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19
* * * * * * * *
Tax expenditure type: Deduction 2014 TES code: A50
Estimate Reliability: Not Applicable * Category 1+
Commencement date: Introduced before 1985 Expiry date:  
Legislative reference: Section 25-55 of the Income Tax Assessment Act 1997

Union dues and subscriptions to trade, business or professional associations are specifically tax deductible up to a maximum amount of $42. This deduction is available in addition to any work related expense deduction.

A46 Denial of deductions for illegal activities

Other economic affairs — Other economic affairs, nec ($m)
2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19
* * * * * * * *
Tax expenditure type: Deduction 2014 TES code: A51
Estimate Reliability: Not Applicable * Category 1-
Commencement date: 1 July 1999 (bribery), 30 April 2005 (illegal activities) Expiry date:  
Legislative reference: Sections 26-52, 26-53 and 26-54 of the Income Tax Assessment Act 1997

Deductibility is denied for a loss or outgoing that is a bribe to a public official, including a foreign public official.

Deductions are also denied for expenditure to the extent it is incurred in the furtherance of, or directly in relation to, activities in respect of which the taxpayer has been convicted of an indictable offence. Indictable offences are those punishable by imprisonment for at least one year.

A47 Increased tax rates for certain minors

Other economic affairs — Other economic affairs, nec ($m)
2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19
-4 -6 -5 -5 -5 -5 -5 -5
Tax expenditure type: Increased rate 2014 TES code: A52
Estimate Reliability: Medium — High    
Commencement date: Introduced before 1985 Expiry date:  
Legislative reference: Part III Division 6AA of the Income Tax Assessment Act 1936

Higher rates of taxation apply to the unearned income of certain minors (for example, those classed as not being in a full-time occupation). Unearned income includes dividend, interest, rent, royalties and other income from property. Further, minors are unable to use the low income tax offset to reduce the tax payable on unearned income.

A48 Part-year tax free threshold

Other economic affairs — Other economic affairs, nec ($m)
2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19
-45 -50 -25 -20 -20 -20 -20 -20
Tax expenditure type: Increased rate 2014 TES code: A53
Estimate Reliability: Medium — High    
Commencement date: 1986 Expiry date:  
Legislative reference: Sections 16 to 20 of the Income Tax Rates Act 1986

Taxpayers who become an Australian resident for the first time, or cease to be an Australian resident, do not receive the full value of the statutory tax-free threshold. From 1 July 2012, they are able to access a tax-free threshold of at least $13,464, plus a pro-rated share of $4,736 corresponding to the number of months in the year that they are a resident for tax purposes.

A49 Philanthropy — deduction for gifts to deductible gift recipients

Other economic affairs — Other economic affairs, nec ($m)
2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19
1,030 1,010 1,080 1,200 1,210 1,230 1,280 1,330
Tax expenditure type: Deduction 2014 TES code: A54
Estimate Reliability: Medium — Low    
Commencement da
te:		 Introduced before 1985 Expiry date:  
Legislative reference: Division 30 of the Income Tax Assessment Act 1997

Gifts of cash and property (subject to certain conditions) of a value of $2 or more to deductible gift recipients can be claimed as a deduction by donors.

A50 Philanthropy — deduction for gifts to private ancillary funds

Other economic affairs — Other economic affairs, nec ($m)
2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19
135 155 130 210 250 280 315 340
Tax expenditure type: Deduction 2014 TES code: A55
Estimate Reliability: Medium — Low    
Commencement date: 1 October 2009 Expiry date:  
Legislative reference: Item 2 of the table in Section 30-15 of the Income Tax Assessment Act 1997

Private ancillary funds are funds established by businesses, families and individuals solely for the purpose of disbursing funds to charitable or philanthropic trusts (or for establishing such trusts). Donations of cash and property (subject to certain conditions) of a value of $2 or more to private ancillary funds which have deductible gift recipient status are tax deductible.

A51 Car expenses — alternatives to the logbook method

Other economic affairs — Total labour and employment affairs ($m)
2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19
* * * * * * * *
Tax expenditure type: Deduction 2014 TES code: A56
Estimate Reliability: Not Applicable * Category 3+
Commencement date: 1987 Expiry date:  
Legislative reference: Division 28 and Subdivision 900-C of the Income Tax Assessment Act 1997

An alternative method to the logbook method (which is based on actual expenditure) is available to value car expense deductions. The ‘cents per kilometre’ method is available up to a maximum of 5,000 business kilometres. Prior to 1 July 2015, the ‘one third of actual expenses’ method and ‘12 per cent of original value’ method were available where business use exceeded 5,000 kilometres.

A52 Tax offset on certain payments of income received in arrears

Other economic affairs — Total labour and employment affairs ($m)
2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19
5 5 5 6 6 7 8 8
Tax expenditure type: Offset 2014 TES code: A57
Estimate Reliability: Medium — Low    
Commencement date: 1986 Expiry date:  
Legislative reference: Sections 159ZR to 159ZRD of the Income Tax Assessment Act 1936

Individual taxpayers who receive lump sum payments of certain income, for example, salary and wages, which accrued in earlier income years may be entitled to a tax offset.

A53 Exemption for personal injury annuities

Other economic affairs — Other economic affairs, nec ($m)
2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19
.. .. .. .. .. .. .. ..
Tax expenditure type: Exemption 2014 TES code: A58
Estimate Reliability: Low    
Commencement date: 2002 Expiry date:  
Legislative reference: Division 54 of the Income Tax Assessment Act 1997

Certain annuities provided to personal injury victims under structured settlements and orders are exempt from income tax. This allows personal injury victims who would be eligible to receive large tax-free lump sum compensation payments to receive all or part of their compensation in the form of a tax-free annuity or annuities.

A54 Exemption of post-judgment interest awards in personal injury compensation cases

Other economic affairs — Other economic affairs, nec ($m)
2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19
3 3 3 4 4 4 4 4
Tax expenditure type: Exemption 2014 TES code: A59
Estimate Reliability: Low    
Commencement date: 1997 Expiry date:  
Legislative reference: Section 51-57 of the Income Tax Assessment Act 1997

Interest accruing on a judgment debt arising in personal injury compensation cases, which relates to the period between the original judgment and when the judgment is finalised, is exempt from income tax.

A55 Low-value depreciating assets — immediate deduction

Other economic affairs — Other economic affairs, nec ($m)
2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19
* * * * * * * *
Tax expenditure type: Deduction 2014 TES code: A60
Estimate Reliability: Not Applicable * Category 2+
Commencement date: 2001 Expiry date:  
Legislative reference: Subsections 40-25(1) and 40-80(2) of the Income Tax Assessment Act 1997

An immediate deduction is available for depreciating assets costing $300 or less where those assets are used mostly to earn non-business income.