38MIncome test

#### 38M Income test This is how to work out an individual’s reduction for adjusted taxable income if clause 38L does not apply to the individual: Method statement Step 1. Work out the individual’s income free area using clause 38N. Step 2. Work out whether the individual’s adjusted taxable income exceeds the individual’s income free area. Step 3. If the individual’s adjusted taxable income does not exceed the individual’s income free area, the individual’s income excess is nil. Step 4. If the individual’s adjusted taxable income exceeds the individual’s income free area, the individual’s income excess is the individual’s adjusted taxable income less the individual’s income free area. Step 5. The individual’s reduction for adjusted taxable income is 20% of the income excess.