The proforma for calculating an individual's tax liability is very important. The method for arriving at the tax due is set out step by step in ITA 2007, s 23. This is illustrated in the attached proforma and is explained in words below.
The tax software will calculate the tax due automatically based on the entries made on the Tax Return; however, it is important to know the principles of the income tax computation so that you can check that it is correct.
Computation of total income (Step 1)
Firstly, it is necessary to identify the amount(s) of income on which the individual is taxable in the tax year, using the rules applicable for each source of income. Each type of income is a component of the total tax liability.