Last amended: 4 February 2010
This topic provides information on the following items that are common to both sole traders and partnerships.
- issues which affect income, and
- value of trading stock on hand.
Items which are income for assessment purposes
The following table describes items which are, and are not, income for assessment of both sole traders and partnerships.
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If... |
then... |
|
goods are taken from business stock for personal use, and not paid for |
the value of the goods is added to gross sales to determine the income. |
|
goods are received in return for services |
the value of the goods is income. |
|
wages, salary or dividends are paid to a sole trader/partner from a business |
they are income. |
|
drawings are made from a sole trader owned or partnership business |
they are not income. The income is the profit of the business, regardless of the level of any capital drawings from it. More →
Exempt Income |
Value of trading stock on hand
The following table describes the treatment of the value of trading stock on hand for income assessment purposes.
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If the value of all trading stock on hand at the end of the year... |
then the excess is... |
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is more than stock on hand at the start of the year |
added to the pensioner's business profit for that year. |
|
is less than stock on hand at the start of the year |
deducted from the pensioner's business profit for that year. |
Generally, these adjustments will have already been made to the profit and loss statement.
Annual Reviews and Date of Effect
Income from sole traders and partnerships is usually assessed annually, when income tax returns or completed financial statements are provided to the Department, with the date of effect of a pension reassessment based on the date this evidence of earnings is received.
Notification obligations still apply where income is assessed annually
The notification obligations still apply to pensioners who are subject to an annual review. If a discernable change to the pensioner's rate of income or asset value occurs during the review year, that change is a notifiable event and the date of effect of the pension reassessment will be based on that event, and whether it was notified within the allowed notification period. For example, the acquisition of a property asset by a pensioner's trust during the review year will be known to the pensioner, and is a notifiable event.
Date of the event or change in circumstances
Where there is no discernable change to the entity's income or asset value during the year, there is no “specified event” on which a date of effect decision can be based. For this reason, the date on which the income tax return or financial statements are finalised and provided to the Department at the end of the review year may be regarded as the notifiable event, for date of effect purposes. For example, a small variation in income received by the entity over the course of the year may not be known until the entity is eventually audited, and may not be able to be attributed to a specified event during the course of the year.