Income Tax Act 2007 section 998

Meaning of "grossing up"

Section 998 defines the concept of "grossing up" as used throughout the Income Tax Acts, explaining how to calculate a pre-tax amount from a net (after-tax) figure.

• Grossing up means working backwards from a net amount to find the original pre-tax figure that, after deducting income tax at a given rate, would equal that net amount.
• The grossed up amount equals the net amount plus the tax deducted from it.
• The formula is: GA = NA + (NA × R ÷ (100 − R)), where GA is the grossed up amount, NA is the net amount, and R is the tax rate percentage.
• This definition applies generally across all the Income Tax Acts, replacing earlier specific provisions such as the former section 877 of ITTOIA.