The word "income" is used in many different contexts in the tax legislation, being the Income Tax Assessment Act 1997 (Cth) and the Income Tax Assessment Act 1936 (Cth). These include:

• taxable income — tax is paid on taxable income. Taxable income is derived by subtracting allowable deductions from assessable income;

• assessable income — includes ordinary income and statutory income;

• ordinary income — are amounts accepted as income for common law purposes. Rent is a type of ordinary income; and

• statutory income — are amounts that the tax legislation deems to be income that needs to be included as part of assessable income. The capital gain made on the sale of a property is a type of statutory income. See Concepts of income.

Income from the sale of property will usually be taxable. The main exception to this rule is the sale of most family homes sold by individuals because of specific exceptions provided in the capital gains tax provisions.

While most sales will be taxable, it is still important to categorise the sale as this will determine the amount of tax payable on the sale of the property. The sale of property can give rise to:

• ordinary income — disposal of property as part of a business or where property is the trading stock of a business;

• statutory income — property is sold as part of a profit making scheme; or

• a capital gain — mere realisation of property as a capital asset.

There are possible exemptions from tax for property that is taxed as a capital gain which can potentially significantly reduce the tax payable on the sale of property. For this reason, taxpayers usually seek to treat the sale of property as a mere realisation of a capital asset. See Income from the sale of property.

Ordinarily, where a taxpayer grants a lease or licence of property, whether wholly or in part, whether at arm's length or otherwise, the amount received is assessable income.

However, rental income is generally not assessable where it is paid as part of a familial arrangement or other non arm's length arrangement. In most cases, the Commissioner of Taxation is concerned about the availability of losses — persons claiming tax deductions for interest payments, and costs of maintaining and running what are essentially private homes. As such, the Commissioner will disregard certain amounts of income as not falling within assessable income so as to limit the availability to claim losses. See Income from leased property.

The assignment of income from property must be distinguished from the assignment or disposal of the property itself. Where an owner of property retains ownership of the property but assigns the rights to the future income from the property for a period of time, then usually adverse taxation consequences arise for the owner.

Where the right to future income is assigned for consideration with the intention of making a profit or gain, the amount received (even when received as a lump sum) is ordinary income.

Even where the amount received would not be ordinary income, specific anti-avoidance rules create statutory income to remove the potential tax effectiveness of certain arrangements that attempt to move income to another taxpayer. See Assignment of income.

Deductions allowable under the tax legislation are divided into general deductions and specific deductions.

The general deduction provisions generally allow a deduction for losses and outgoings incurred in an attempt to create assessable income. No deduction however can be claimed to the extent that the loss or outgoing:

• is of capital or of a capital nature;

• is a loss or outgoing of a private or domestic nature;

• is incurred in deriving particular types of income; or

• is specifically prevented from being claimed as a deduction.

The specific deduction provisions are listed in the tax legislation. Expenditure on certain "repairs" is an example of a specific deduction relating to property. To be entitled to the deduction, the qualifications set out in the tax legislation would need to be satisfied. See Deductions.

Specific provisions in the tax legislation allow for a deduction to be claimed for the capital cost of constructing capital works to be used for income-producing purposes or certain research and development activities. The qualifying costs can usually be written off by the owner of the relevant property over a period of 25 to 40 years. See Capital allowances.