Income Tax Assessment Act 1997

The Income Tax Assessment Act 1997 (ITAA 1997) is the primary legislation governing the assessment of income tax in Australia, alongside the Income Tax Assessment Act 1936 (ITAA 1936). The 1997 Act was enacted as part of the Tax Law Improvement Project to rewrite the income tax law in simpler, more accessible language. The Act defines assessable income (ordinary income and statutory income), exempt income, and deductions. It provides for the taxation of individuals (progressive tax rates), companies (flat rate), superannuation funds, and other entities. The Act also contains the capital gains tax provisions (Parts 3-1 and 3-3), the small business concessions, and the tax offsets and rebates.

Legal area: Tax law establishes the legal framework for the assessment and collection of Commonwealth taxation, including income tax, GST, and administrative penalties.

Year enacted: 1997

Full text: https://www.legislation.gov.au/Details/C1997A00038

Key Provisions

• Section 4-1: Assessable income (ordinary income and statutory income)
• Section 6-1: Ordinary income (income according to ordinary concepts)
• Part 2-1: Assessable income and exempt income
• Part 2-40: Capital gains and losses (CGT regime)
• Part 2-42: Small business entities (concessions and simplified rules)
• Division 10: Special professional income (artists, sportspeople)
• Division 115: Discount capital gains (50% discount for individuals)
• Division 290: Personal superannuation contributions (tax deductibility)

Significance

The ITAA 1997, together with the ITAA 1936 and the Income Tax Rates Act 1986, forms the legislative foundation of Australia’s income tax system, which generates approximately 50% of Commonwealth revenue. The Act’s progressive tax rates apply to individuals, with the top marginal rate at 45% (plus the Medicare levy). The capital gains tax provisions, introduced in 1985 and rewritten in the 1997 Act, include the 50% CGT discount for individuals and the main residence exemption. The Act has been amended annually by each federal budget.