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Div 405 Averaging

If the taxpayer is an artist, sportsperson, writer etc. and eligible for concessional rates of tax under the Income Averaging System. The scheme is contained in the ITAA 97 Div 405, sec:405-1 to 405-50.

The income averaging scheme applies in any income year in which the taxpayer was a special professional and:

  • was a resident of Australia at any time during the year and had a taxable professional income of $2,500, or

  • was a resident at any time during a preceding income year and had a taxable professional income of $2,500.

To access Div 405 Averaging, click Return PropertiesEstimates > Div 405 Averaging.

The detail needed to calculate tax on average income should be entered in fields provided:

Averaging NOT required this year for Eligible Professional IncomeIn any given year that the taxpayer's income is not to be averaged, tick this checkbox to indicate that tax should be calculated without regard to averaging.
Year of Income’ Pursuant to Section 405-50Enter the year of income as defined in Section 405-50. The year of income relates to the number of average years, for example, the 3rd average year or the 7th average year. In this context, the Year of Income does not mean the current financial year.
Residency StatusSelect either Original or Non-original resident to indicate the method for calculation of the average eligible taxable income. There are different rules for resident and non-resident taxpayers.
Prior Years' IncomeEnter the eligible taxable income for each of the prior years as applicable. The income for the first year of averaging must be at least $2,500.

Tax Pre-fill

Fields in this property sheet are pre-filled by the ATO. For more information, see Pre-fill manager.

If ATO doesn’t provide a value for the latest year, Tax won’t pre-fill Div 405 Averaging. If you haven’t reviewed the Div 405 Averaging in the Estimate tab after pre-fill, there will be a validation message in the F3 validation summary. You’ll need to click Edit or OK to clear the validation message.

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