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10.3.2 Assessing the Income and Assets of Sole Traders and Partnerships

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This section contains information on the assessment of income and assets of sole traders and partnerships.


According to section 5H of the VEA income is:

  • an amount earned, derived or received by a person for the person's own use or benefit;
  • a periodical payment by way of gift or allowance; or
  • a periodical benefit by way of gift or allowance.

 

 

An asset means any property, including property outside Australia.

For the purposes of income and assets assessment, a sole trader is a business owned by one person.



The business:

  • is not a separate legal entity from the owner,
  • is not a separate accounting entity, which means that sole traders need ONLY lodge a personal tax return,
  • may be run in the owner's name OR under a registered business name, and
  • may or may not have employees.



The owner is:

  • liable for all the debts of the business, and
  • entitled to all the profits of the business.

For the purposes of income and assets assessment, a partnership is the relationship which exists between people carrying on business in common, with a view to making a profit. A partnership agreement may be oral OR written. The business may be run:

  •       in the owners' name(s), or
  •       under a registered business name.

The business is not a separate legal entity, which means that although the partnership lodges a tax return, the profit or income is assessable in the hands of the individual partners.

Each partner:

  •       owns an agreed portion of the business assets,
  •       receives an agreed portion of the profits, and
  •       is 'jointly and severally' liable for all business debts.