Exempt income is income on which you do not need to pay tax. It is income which, but for an exemption imposed by law, would be liable for income tax or which is for some other reason not subject to taxation. However, exempt income may be taken into account when calculating the tax losses of earlier financial years that you can deduct, and the adjustable taxable income of any dependants.
Exempt income can include:
- Some Australian government pensions, e.g. Centrelink disability support pension to a person who is under pension age
- Some Australian government allowances, e.g. carer allowance and child care benefit
- Some overseas pay for Australian Defence Force and Federal Police personnel
- Australian government education payments, e.g. allowances for students under 16 years old
- Some scholarships, bursaries, grants and awards
- A lump sum payment received on surrender of an insurance policy, i.e. for mortgage protection, terminal illness, or personal injury
Exempt income is legally distinct from non-assessable non-exempt income (e.g. redundancy payments, super co-contributions) and other amounts that are not taxable (e.g. gifts, prize money, child support).