Sole trader or partnership income

Business income and JobKeeper payments count in the income test.

If coronavirus (COVID-19) has affected your turnover, your business may be eligible for JobKeeper payment. If JobKeeper payment affects your business income, you must let us know.

If you’re a sole trader or in a business partnership, you must tell us so we can assess your income.

How we assess your income

We assess income you earn from your business separately to any other employment income you might have.

You don’t need to report your business income each fortnight as part of your employment income reporting. Instead, you need to tell us if:

  • you’re involved in a business, when you first make a claim
  • you or your partner start a business when you’re on payment.

We use the information you give us about your business to work out an annual income amount. We then use that amount to work out your fortnightly rate of payment.

If your business income or assets change, you must let us know.

If you get any income from another source, such as employment income, you must report it each fortnight.

What goes into the income test

Your assessable income as a sole trader or business partner is your gross income minus the deductions we allow.

If you or your business gets JobKeeper payment, it is part of your gross business income. Read about:

If you’re a sole trader, we include all the business income less allowable deductions in your income test.

If you’re in a business partnership, we include your share of the business income less allowable deductions in your income test.

Deductions we allow

You can’t claim as many deductions in the income test as you can in your tax return.

You can claim all of these:

  • costs needed to earn business income
  • depreciation of business assets claimed under Division 40 of the Income Tax Assessment Act 1997
  • employee superannuation.

You can’t claim any of these:

  • donations
  • borrowing costs
  • entertainment
  • amortisation of intangible assets
  • prior year losses
  • private health insurance premiums
  • personal life insurance premiums
  • offsetting losses from another business
  • superannuation for sole traders or business partners
  • some capital costs
  • tax agent’s fees.

You also can’t claim depreciation or instant asset write-offs claimed under the small business entity concessions. These are included in Subdivision 328-D of the Income Tax Assessment Act 1997.

Details we need

You need to give us details about your business income and assets.

Details about your business income and assets

We need a completed Business details form. You also need to give us the most recent versions of each of the following items:

  • your personal tax return
  • profit and loss statement or income statement
  • depreciation schedule
  • balance sheet
  • livestock trading account if the business is a primary production business.

You should also give us a copy of your financial statements each year. This includes your personal and business income tax returns. You should give us these within 14 days of preparing them, or your tax agent preparing them.

Financial statements include all of the following:

  • profit and loss statements
  • balance sheets
  • depreciation schedule
  • notes to accounts.

Details about claims under Subdivision 328-D

You may have claimed small business entity concessions under Subdivision 328-D of the Income Tax Assessment Act 1997. If this is the case we won’t allow expenses related to either:

  • depreciation
  • instant asset write-off.

If you’ve claimed expenses under Subdivision 328-D we may still allow an expense for depreciation. We can do this if you can let us know the amount you could’ve claimed under Division 40.

To do this you’ll need to provide a depreciation schedule or document showing us how you calculated the Division 40 amount.

When and how to update your business income and assets

You need to tell us within 14 days if there are any changes to your business income or assets. This includes if JobKeeper payment has affected your business income.

To do this, you’ll need to give us an updated:

You may get a debt you’ll need to pay back if you don’t tell us about:

  • a profit increase
  • an increase to your business assets.

How to tell us if you get JobKeeper payment

If your business gets JobKeeper payment, it is part of your business income. If JobKeeper payment changes your overall business profit, you have to tell us.

Sole traders and partnerships that receive JobKeeper payment don’t need to report it as employment income. This is because JobKeeper payment is part of your business income and not your employment income.

Report all other employment income or income from gifts or allowances. Read how we define income.

If your overall business profit has changed

Download and complete the Profit and Loss Statement form to show the change in business income. Include any payment of JobKeeper Payment in your business income.

If your overall business profit hasn’t changed

You don’t need to do anything. If your business profit does change in the future, you’ll need to complete the Profit and Loss Statement form.

Page last updated: 3 July 2020