When prior-year income is received, the whole of the amount is required to be included in the year it is received. But you can claim a tax offset for that delayed income. This is calculated by comparing the tax amounts calculated before and after the inclusion of the lump sums in the attributable years.
This earlier years’ tax adjustment is estimated by using the actual tax rates for the previous 2 years, and an average of those 2 years’ rates for any years prior to that.
The delayed income offset applies to “ eligible income” as defined in Section 159ZR IT AA 1936. The lump sum payment in arrears tax offset is not available where it is less than 10% of your normal taxable income excluding the lump sum payment. T o be eligible for the offset, the lump sum income must be for arrears payments for salary or wages which accrued from periods earlier than 12 months before payment
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