You may earn your income in more ways than just from your job and ignorance is not an excuse from the ATO. There are many ways people may make an income and it all adds to your taxable income.
Even though you might think that receiving an insurance payout or are claiming workers compensation is not an income, the ATO does regard it as such. These payments may impact your tax, but there are claims that you are entitled to make when you do declare these types of payouts.
Compensation and insurance payments
Insurance payouts include insurance for lost salary or wages under an income protection insurance policy, a payout for sickness or accident insurance policy or workers compensation scheme.
A personal injury claim with an agreement to a settlement, or a favourable court order in which you receive compensation in the form of a lump sum payment, structural (periodic) payments (or both) are tax-free if certain conditions are met.
Rules and regulations
There are rules that apply to these payments that will affect your tax claims.
Keep in mind to check that tax has been withheld from payments made to you under an income protection, sickness or accident insurance policy that you own as a policyholder before you lodge your return. If tax has not been withheld, then you’ll need to declare the payments listed as ‘other income’ on your tax return.
Prizes and awards
If you’ve won a prize on ‘Hot Seat’ or maybe you’ve cooked up a deelish dish and won a cooking prize on ‘Masterchef’ – go you! But you may need to declare it on your tax return. In fact, any prize you’ve won from a draw or lottery run by your bank, building society, credit union or other investment body must be declared. This includes cash, low-interest or interest-free loans, holidays or cars.
If you’ve won prizes as a game show contestant, you only need to declare them if you’ve made regular appearances or received fees from the game show.
However, if you’ve won through an ordinary lottery, such as lotto draws and raffles, all you have to do is worry about how you’re going to spend the money. They don’t need to be included.f you’ve made a profit from selling that house or boat (or any prize) that you’ve won, the proceeds will need to be declared.
Income from rendering personal services
Have you received a grant? Offer personal services, such as law advice, medical, design, finance accounting and even performing arts either to individuals or groups for compensation? You may not have received a direct income, but you may be eligible to deduct business expenses.
ATO interest – remissions or recoupments
If you’ve been the recipient of interest from the ATO, you can claim a deduction for that interest.
There’s no doubt that lodging a tax return can be complex, especially when several streams of income need to be declared. Tax agents are fully certified accountants who have specialised in tax law. They understand the latest changes and what you need to include on your return – even if you don’t. All ITP Income Tax Professionals are registered with the Tax Practitioners Board of Australia. Book an appointment and speak to a professional today.