Income Tax Assessment Act 1997

CHAPTER 3 - SPECIALIST LIABILITY RULES  

PART 3-45 - RULES FOR PARTICULAR INDUSTRIES AND OCCUPATIONS  

Division 392 - Long-term averaging of primary producers ' tax liability  

Guide to Division 392  

SECTION 392-5   Overview of averaging process  
How averaging adjustments work

392-5(1)    
This Division reduces or increases your income tax liability to bring it closer to what it would have been if worked out using a special rate of income tax. That rate (the comparison rate) is based on the income tax that you would pay for the current year on the average of your taxable income for up to the last 5 income years.

Example:

The graph shows how averaging taxable income reduces the effect of variations in taxable income (giving a fairly steady comparison rate from year to year).

Tax offset as averaging adjustment

392-5(2)    
You may be entitled to a tax offset if the income tax you would pay on your basic taxable income for the current year at the comparison rate is less than the income tax you would pay on that income (apart from this Division and certain other provisions).

See the examples of years 5, 6, 7 and 9 in the graph in subsection (4).

Extra income tax as averaging adjustment

392-5(3)    
You may be liable to extra income tax on some or all of your basic taxable income for the current year if the income tax you would pay on your basic taxable income for the current year at the comparison rate is more than the income tax on that income (apart from this Division and certain other provisions).

See the examples of years 8 and 10 in the graph in subsection (4).

Example of the effect of averaging

392-5(4)    
The graph shows an example of the effect of averaging, using the same income figures as the graph in the example in subsection (1).

Note:

The example assumes that all the basic taxable income was from a primary production business.

Effect of non-primary production income on averaging adjustment

392-5(5)    
Your income from sources other than your primary production business may affect the adjustment of your income tax. If more than $5,000 of your basic taxable income is attributable to those sources, your averaging adjustment will be reduced to reflect the proportion of your basic taxable income attributable to primary production. (There are special shading-out arrangements if your taxable income from other sources is between $5,000 and $10,000.)

No adjustment in certain cases

392-5(6)    

Your income tax will not be adjusted under this Division in certain cases. In particular, you can choose not to have your income tax adjusted under this Division for 10 income years.