Income from sole trader or partnership businesses

We assess your financial interest in a sole trader or partnership business to determine your assessable income.

In the case of a partnership, your financial interest is determined by the partnership agreement.

So that the assessment reflects the annual profit, assessable income is the gross income of the business less deductions allowed for social security purposes. Some deductions may differ from those allowed for tax purposes.

The deductions we allow are:

  • expenses incurred as a necessity in the production of business income
  • depreciation of business assets, and
  • superannuation contributions for employees of the business

We do not deduct:

  • prior year losses
  • losses from an unrelated business
  • wages or superannuation contributions for principals of a sole trader or partnership business, or
  • certain capital expenses

If you or your partnership claims deductions under the definition of a small business entity concession on the Australian Taxation Office website, we may not allow some of these concessions.

We generally use the annual financial statements of the business to determine your assessable income. For a business that has not yet completed statements, or where the current income has changed since the last statement, we will use a profit and loss statement for a recent period, usually 13 weeks.

If you have a sole trader or partnership business, you need to report it.

Read more about income reporting.

Page last updated: 22 July 2016