Business structures

Your business structure may affect your and your partner’s payments from us.

Business types

Business partnerships

This is a business that 2 or more partners own. A partner can be a person or a business structure like a company or a trust. Each partner owns an agreed part of the business assets and profits.

A business partnership has the following characteristics:

  • isn’t incorporated like a company
  • a partnership agreement that sets out its rights and obligations, which can be in writing, verbal or implied.

The partners have unlimited liability. This means both:

  • partners are personally liable for all the business debts
  • if one business partner doesn’t pay their share of a debt, the others must pay it.

The business can trade under the business partners’ names or a registered business name. You or your partner are part of a business partnership if either of you are involved with another person in the running of a business under a partnership arrangement.

Sole trader or self employed

A sole trader is someone who’s self employed. You’re a sole trader if you either:

  • own and run a business on your own
  • choose when, where, how and who you work for.

As a sole trader all of the following apply:

  • you’ll only need to lodge a personal tax return
  • you own all the assets of the business
  • all business profits are yours
  • you’re responsible for all business debts.

You can trade under your own name or a registered business name.

Business assets and income

Any personal or business assets or income can affect your payments from us.

Being in business includes being either:

  • a business partner
  • a sole trader
  • self employed.

You need to tell us about all of the following:

  • income you earn from being in business
  • income your partner earns from being in business
  • assets you or your business own
  • assets your partner or their business owns.

Assets

In your assets test we include your share of the net assets of the business. To get this amount we add up the current market value of your share of all business assets. We then subtract your total share of the business liabilities.

If you’re a sole trader

If you’re a sole trader, assets can include your personal assets used for the business as well as business assets.

Liabilities

Your financial statement tells us what these are.

We don’t subtract all liabilities. For example, we exempt liabilities secured against the main home of members of the partnership.

Income

In your income test we include your share of the business income. To get this figure we take your share of the gross income from the business, and subtract deductions.

Deductions

We don’t allow all the deductions you can claim in your tax return. This is because social security law and tax law are different.

All of the following deductions are allowed under social security law:

  • costs needed to earn business income
  • depreciation of business assets
  • employee superannuation.

We don’t include any of the following deductions:

  • past year losses
  • offset losses from other businesses
  • superannuation for sole traders or business partners
  • some capital costs.

Documents we need from you

We’ll need some documents from you if you’re in a business. We’ll also need these from your partner if they’re in business.

If you’re in any kind of business

The Business Details form.

If you’re in a business partnership

We’ll need all of the following documents from you and your partner:

  • The  Business Details form
  • a copy of your partnership agreement
  • your most recent partnership tax return
  • your most recent profit and loss statement or income statement
  • your most recent depreciation schedule
  • your most recent livestock trading account if you have one.

If you’re a sole trader

We’ll need all of the following documents from you:

  • The  Business Details form
  • your most recent personal tax return
  • your most recent profit and loss statement or income statement
  • your most recent depreciation schedule
  • your most recent livestock trading account if you have one.
You can only claim depreciation for the time when you own the asset and the business is using it. Your depreciation schedule shows how long the business used the asset for as a percentage of the total time you owned it for.

Page last updated: 16 September 2019

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