You must declare any money made from passive income sources (like share dividends or rental income from investment properties) to the tax office, as it will form part of your taxable income for the year. This is something to consider, especially if your additional passive income pushes you into a higher marginal tax bracket.
However, some passive income sources also provide tax benefits. For example, dividends from ASX companies often come with franking credits attached, which you can use as a tax deduction at tax time. Or, take the often-debated practice of negative gearing. When the income you earn from an asset (typically the rental income from an investment property) isn’t sufficient to cover your associated expenses (like the interest repayments on your mortgage), you will make a loss on that investment. Through negative gearing, you can use this loss to offset your other taxable income and decrease your tax burden.