Sole trader or partnership income

Business income and JobKeeper payments count in the income test.

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 other employment income.

When you make a claim, you need to tell us if you’re involved in a business.

If you’re getting a payment from us, you need to tell us if you or your partner start a business.

You don’t need to report your business income each fortnight as part of your employment income reporting.

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 payment rate.

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's included in 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.

If you’re a sole trader we use all business income less allowable deductions.

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

Deductions we allow

You can’t claim as many deductions for your payment 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 such as a large equipment purchase
  • tax agent’s fees.

You also can’t claim depreciation or instant asset write-offs claimed under the small business entity concessions. These are 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

You need to provide regular updates to us about your business and financial situation. You can provide details of your business income and assets by completing a Business details form. You also need to give us the most recent versions of each of the following items:

  • your personal tax return
  • business income tax returns
  • 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 each year of your financial statements and personal and business income tax returns. You should give us these within 14 days of you 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 the deduction of expenses related to either:

  • depreciation
  • instant asset write-off.

If you’ve claimed expenses under Subdivision 328-D we may still allow the deduction of an expense for depreciation. To do this, you must let us know the amount you could’ve claimed under Division 40.

You’ll need to provide a depreciation schedule or document to show how you calculated the Division 40 amount.

What you need to tell us if you’re getting JobKeeper Payment

If coronavirus (COVID-19) has affected your turnover, your business may be eligible for JobKeeper Payment.

Read more about:

If your business gets JobKeeper Payment, it’s part of your business income. If JobKeeper Payment changes your overall business profit, you have to tell us.

If your business gets JobKeeper Payment for you, you don’t need to report it as your employment income. This is because JobKeeper Payment is part of your business income and not your employment income.

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.

If your business income has changed you need to give us an updated profit and loss statement.

If your business assets have changed, you need to give us an updated balance sheet.

You may be overpaid if you don’t tell us about:

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

If you’re overpaid, a debt may be raised and you’ll have to pay us back.

You must report all other employment income to us. You must also report income from gifts or allowances. Read more about how we define income.

If your overall business profit has changed

If this is the case, you must provide an updated profit and loss statement. You can choose to download and complete the Profit and Loss Statement form to show the change in business income. Or, you can provide a profit and loss statement via your accounting software . You must 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 give us an updated profit and loss statement.

Page last updated: 17 September 2020