This section contains information on the assessment of income [2] and assets [2] of sole traders [2] and partnerships [2].
According to section 5H of the VEA [3] income is:
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:
The owner is:
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:
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:
VEA ? [5]
Last amended 25 August 2008
This topic provides information on the following:
Assessable income and assets for sole traders and partnerships are almost identical, except that:
The provisions in this topic are only concerned with sole traders and partners who are operating a business. The following table describes when a pensioner is considered to be operating a business.
If the pensioner... |
then they are... |
is carrying on a trade, occupation or profession as an on-going concern |
operating a business. |
obtains rent from:
|
not operating a business, but are obtaining income from a profit making transaction. The income assessed is the profit from the transaction, after taking into account the expenses incurred in obtaining the income. More ? [6] |
VEA ? [7]
Income from a sole trader or partnership business is the net amount:
For assessment purposes the current annual rate of income is used, generally based on the most recent taxation return.
More ? [8]
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.
More ? [9]
For the purposes of income and assets assessment, a sole trader is a business owned by one person.
The business:
The owner is:
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:
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:
According to section 5H of the VEA [3] income is:
An asset means any property, including property outside Australia.
Profit, for a business, is the amount of earnings in excess of its expenses over 12 months.
Last amended: 4 February 2010
This topic provides information on the following items that are common to both sole traders [2] and partnerships [2].
VEA ? [21]
The following table describes items which are, and are not, income for assessment of both sole traders and partnerships.
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 [2] are made from a sole trader owned or partnership business |
they are not income. The income is the profit [2] of the business, regardless of the level of any capital drawings from it. More ? [22] |
VEA ? [23]
The following table describes the treatment of the value of trading stock on hand for income assessment purposes.
If the value of all trading stock on hand at the end of the year... |
then the excess is... |
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.
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.
More ? [24]
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.
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.
For the purposes of income and assets assessment, a sole trader is a business owned by one person.
The business:
The owner is:
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:
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:
According to section 5H of the VEA [3] income is:
Drawings are the withdrawals of funds from a business by the proprietor during the financial year, and represent either a withdrawal of capital previously advanced to the business, or an advance on profits to be earned by the business.
Profit, for a business, is the amount of earnings in excess of its expenses over 12 months.
Last amended: 20 June 2022
This topic provides information on the following:
This topic should not be used for determining allowable deductions from income from real estate. This is because some deductions only apply to business income and not to income earned from real estate.
Please refer to VEA [30] section 46-'General meaning of ordinary income'
VEA section 46C allows the ordinary income of a business for income test purposes, to be reduced by the amount of certain deductions which are allowable for taxation purposes. However, the deductions MUST:
Division 40 of the Income Tax Assessment Act 1997 explains depreciation of plants relating to a business that are allowable deductions.
The definition of plant may include machinery, tools, structural improvements, plumbing fixtures and animals used in a business to produce assessable income.
The following table describes some allowable business deductions for BOTH sole traders and partnerships, for income test purposes.
Category | Description |
---|---|
Expenses | ONLY expenses directly relating to the normal operation of the business and which are allowable under VEA section 46C. That is, expenses:
|
Depreciation | Depreciation is:
. |
Superannuation contributions for employees | Deductions are allowed for superannuation contributions for employees who are either:
|
Rent or mortgage interest, when business is conducted from the income support recipient's home | A deduction is allowed from the gross income, ONLY for rent or mortgage interest on the portion of the premises actually involved in conducting the business. |
Salary/wage Note : The profit and loss statement MUST be checked to ensure the payments are a salary/wage. Note : Care must be taken to ensure the salary/wage is counted once only (as part of the business income), and that they are NOT also counted as 'earnings'. | Any salary/wages (NOT a drawing) paid by a business to a sole trader or one or more of the partners (as well as any employees), is an allowable business deduction for income test purposes. Deductions for salary/wages or dividends paid to:
Normal income testing rules apply. If the business makes a net loss the person's share of the loss can be offset against any salary/wage paid to them by the business. |
The following table lists items that are NOT allowable deductions when calculating business income for pension, benefit or allowance purposes. If further explanation or examples are required, they are provided in the second column.
Item | Example/Explanation |
---|---|
Capital expenditure | Example: Purchase of a new piece of machinery or replacement of fixtures (rather than repair). |
Investments in Farm Management Deposits (this scheme, launched on 2 March 1999, replaces the Income Equalisation Deposits and Farm Management Bonds schemes) | Explanation: This investment type is only available to farmers. Allowed as deductions from income for taxation purposes in the year in which they are made. The deposits are NOT regarded as income when withdrawn, however the equalisation deposits are the farmer's personal asset and are therefore subject to deeming. Please refer to CLIK Policy Library 10.3.5 for further information. |
Superannuation contributions for the sole trader or partner of the partnership | Explanation: A sole trader or a partner of a partnership is not considered to be an employee. |
Obsolescence | Explanation: Obsolescence is a loss of capital value when an item can no longer be used productively. It is different from depreciation, in that the loss is NOT the result of the work the asset has performed but rather because it can no longer be used at all. |
Donations to charities | Explanation: Donations to charities are allowable deductions for taxation purposes, however for social security purposes are NOT allowable deductions and will be assessed for the income test. Donations to charities are voluntary contributions and not necessary expenses of a business. |
Carried forward business losses | See details below this table. |
If a business runs at a loss, a nil amount is included in the income test. Only the income support recipient's share of the net result from a partnership is assessed.
Business losses from previous years are NOT allowed as deductions for profits from the current year.
Business losses from the current year are generally NOT allowed as deductions from other profits or income derived from unrelated sources, such as:
Although the ATO [31] allows losses to be deducted from other income, this is not the case for income testing of pensions or allowances.
Losses within a sole trader business or partnership CAN be offset against the profits of other NECESSARILY RELATED activities if an income support recipient is involved in:
Note: A necessarily related activity refers to a particular activity within a business operation and does not necessarily refer to the entire business operation.
Note: Necessarily related means that if the first activity that made a loss had not occurred, then the income from the second activity would:
Example: An income support recipient:
The following table describes when the losses can and cannot be offset.
If the farm and quarry operation are carried out on … | then the losses from farm activities … |
---|---|
the same site AND a tractor is used on the farm as well as to transport material and equipment to and from the quarry, | that relate SPECIFICALLY to the use of the tractor CAN be offset against the business income from the quarry operation. Explanation: Even though the farm and quarry are 2 separate operations, they have NECESSARILY RELATED activities, as the income from the quarry would NOT have been generated without the use of the same site and the use of the tractor, both of which are used in the farm operation. |
different sites AND are run as unrelated businesses not using equipment in common, | CANNOT be offset against the quarry operation income. Explanation: They are separate operations which do NOT have necessarily related activities. |
A sole trader or partner in a partnership is allowed to offset any loss from that business operation activities against their share of any attributed income from a private controlled trust or company (and vice versa), provided the loss of one business activity is NECESSARILY RELATED to the profit of the other business' activities.
VEA ? [33]
This topic provides information on the following:
If a business runs at a loss, a nil amount is included in the income [2] tests. Only the pensioner's share of the net result from a partnership, trust or company [2] is assessed.
Business losses from the current year, or from previous years, are not allowed as deductions from other profits [2] or income derived from unrelated sources, such as:
Although the Taxation Office allows losses to be deducted from other income, this is not the case for income testing of pensions..
Losses within a partnership can be offset against the profits of other necessarily related activities if a pensioner is involved in:
Necessarily related means that if the activity which made a loss had not occurred, then the income from the other activity would:
If a pensioner has an interest in a partnership that consists of a farm operation and a quarrying operation.
The following table describes when the losses can and cannot be offset.
If the farm and quarry operation are carried out on... |
then the losses from the farm... |
the same site and the farm tractor is used on the farm and to transport material and equipment to and from the quarry site |
that relate specifically to the use of the farm tractor can be offset against the business income from the quarry operation. Even though the farm and quarry are two separate operations, they are necessarily related, as the income from the quarry would not have been generated without the use of the farm tractor. |
different sites and are run as unrelated businesses not using equipment in common |
cannot be offset against the quarry. They are separate operations which are not necessarily related. |
For the purposes of income and assets assessment, a sole trader is a business owned by one person.
The business:
The owner is:
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:
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:
According to section 5H of the VEA [3] income is:
Company has the same meaning as in the Income Tax Assessment Act 1997.
Profit, for a business, is the amount of earnings in excess of its expenses over 12 months.
VEA ? [36]
This topic provides information on the following items that relate to partnerships [2] only:
Assessable income is the pensioner's share of the gross income of the partnership, less allowable deductions. If the partnership makes a loss, the loss cannot be offset against income from unrelated sources.
Any salary paid by a partnership to one or more of the partners, is an allowable business deduction for income test purposes. The following table describes how salary paid to a partner, who is a pensioner, is treated for the income tests.
If salary is paid to a pensioner... |
Then... |
and the partnership makes a profit [2] |
the salary is added to the pensioner's profits from the partnership to determine their business income. |
and the partnership makes a net loss |
the partner's share of the loss can be offset against any salary paid to them by the partnership. For example, if the pensioner's salary is $6,000 and their share of the partnership loss is $3,500, then their assessable income is $2,500. |
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:
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:
According to section 5H of the VEA [3] income is:
Profit, for a business, is the amount of earnings in excess of its expenses over 12 months.
Last updated 22 December 2010
The following table summarises the assessable income, and its treatment, for pensioners from a sole trader's business or a partnership [2].
Income Source |
Treatment |
Sole Traders and Partnerships |
|
Rent paid by a business to a pensioner |
Add it to assessable net profit [2] and assess as income on an annual basis. It can be offset against the pensioner's share of the business loss. |
Capital gain or loss on disposal of depreciated assets [2] distributed via the business structure's profit and loss statement |
Do not include when calculating the current rate of assessable income for the business unless it is part of the normal activity of the business. |
Capital gain or loss on disposal of assets not depreciated and distributed via the business structure's profit and loss statement (not including managed investments and shares) from business assets |
Do not include when calculating the current rate of assessable income for the business unless it is part of the normal activity of the business. Example: property developers make their income from capital gain so would have capital gains included in their assessment. |
Capital gain or loss from managed investments and shares |
The net amount must be included as assessable income. |
Capital gain or loss on the sale or winding up of a business |
Do not include in the income assessment as the gain or loss is not directly related to the normal activity of the business. |
Loan interest paid by the business to the owner |
If it is listed as an expense on the profit/loss statement it is allowed as a deduction against business income. No deeming applies. The amount received by the owner, however, is added to the adjusted net business profit. It can be offset against a business loss. |
Income Source |
Treatment |
Sole Traders and Partnerships |
|
Loan interest paid by the business to a third party who is not the owner |
Allowed as a deduction if it is listed as an expense on the profit/loss statement. If the payments are made to a pensioner who does not own the business, the amount received is disregarded as income, and deeming is applied to the investment. |
Petty cash and financial investments used as part of the on-going operations of the business |
Actual income is included as part of the business profit, and no deeming applies. Deductions for investment expenses claimed on the profit/loss statement are allowed. |
Financial investments not used as part of the operations of the business |
|
Income equalisation deposits, farm management deposits, farm management bonds More → [39] |
|
Income Source |
Treatment |
Sole Traders only |
|
Business net profit |
Hold it as assessable income on an annual basis after making adjustments for non-allowable expenses. |
Salary to pensioner from business |
Add it to assessable net profit and assess it as income on an annual basis. It can be offset against the pensioner's share of the business loss. |
Income Source |
Treatment |
Partnerships only |
|
Partner's share of profit |
Hold it as assessable income on an annual basis after making adjustments for non-allowable expenses. |
Salary from partnership |
Add it to assessable net profit and assess it as income on an annual basis. It can be offset against the pensioner's share of the partnership loss. |
The date of effect policy for sole trader and partnership income, where annual reviews are undertaken following the receipt of an income tax return or completed financial statements.
More → [40]
Income Equalisation Deposits
9.5.4/Description - Loans, Bills, Debentures, Notes, Bullion & Equalisation Deposits [41]
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:
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:
Profit, for a business, is the amount of earnings in excess of its expenses over 12 months.
An asset means any property, including property outside Australia.
Last updated:1 June 2021
VEA ? [45]
This topic provides information on the following:
VEA ? [46]
The value of the net assets of a business run by a sole trader are assessable if the owner or their partner is a pensioner. The amount to be taken into account for assets test purposes is the current market value [2] of the assets, less the 'business' liabilities listed on the financial statements. If the pensioner is involved in primary production activities, section 52CA [10] of the VEA rules apply. This section allows for primary producers to offset total debts against the total assets of the business.
More ? [47]
Each item on the balance sheet must be individually examined and a judgement made about whether the asset value recorded is reasonable. In most cases, the asset value recorded on the balance sheet is accepted, particularly for assets such as:
However, if necessary, the balance sheet must be adjusted and the value of assets owned by the business reassessed to reflect current market value. Using conventional accounting methods, fixed assets are recorded at historical cost, usually the purchase price less depreciation.
More ? [48]
The following table describes the requirements for valuation of real estate belonging to a sole trader.
More ? [49]
If the real estate... | Then... |
is recorded on the balance sheet, | a valuation of the property by a qualified valuation service provider may be necessary. |
is a farm, | a valuation of livestock, plant and equipment, as well as the property itself, excluding the principal home [2] and any exempt land, by a qualified valuation service provider may be necessary. |
includes the pensioner's principal home and up to two hectares [2] of adjacent private land [2], | the assessable value of the real estate is the value of the portion of the principal home and land that is used for commercial purposes. Any land in excess of the two hectares of adjacent land is assessable. A valuation by a qualified valuation service provider may be necessary. |
includes the pensioner's principal home and all land on the same title, More ? [50]
| a valuation by a qualified valuation service provider may be necessary if the property includes titles other than the principal home title. |
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:
The owner is:
The market value of an asset [2] is the point at which a willing purchaser and a willing, but not anxious vendor, would reach agreement.
The market value of an asset is only decreased by the value of an encumbrance secured against it. The market value of an asset is not reduced by any costs which may be incurred if the asset was to be sold.
The principal home has the meaning given by subsection 5LA(1) [61] of the VEA and subsection 5LA(2) [61] of the VEA. The principal home of a person is generally the place in which they reside. In certain circumstances, however, the principal home of a person can be the place in which they formerly resided. The following property is regarded as part of the principal home.
4.9421 acres.
Private land is land of [glossary:two hectares:DEF/Two Hectares] or less, which is:
Last updated: 1 June 2021
This topic provides information on the following:
The amount to be taken into account for assets test purposes is the pensioner's interest in the partnership. Interest in the partnership is the amount that the pensioner would receive if the partnership were wound up, and depends on the:
The proprietors' funds in a partnership:
Note: Each partner's share of the partnership funds are shown in the financial accounts as Proprietors' funds.
The pensioner's share of the proprietors' funds is the total of both fixed and current capital accounts [2] in their name, and this can be obtained from the written partnership agreement and/or the latest balance sheet. An initial estimate of the pensioner's interest in the partnership is the amount shown on the balance sheet as:
Note: If a balance sheet is not available, a list of all partnership assets and liabilities, including their current values, may be required.
The recorded value of fixed assets, other than real estate, can generally be accepted for valuation purposes. Using conventional accounting methods, fixed assets are recorded at historical cost, usually the purchase price less depreciation.
More ? [65]
The following table describes the requirements for valuation of real estate.
More ? [66]
If... | Then... |
real estate is recorded on the balance sheet, | it must be assessed at its current market value [2] and a valuation by a qualified valuation service provider may be necessary. |
the real estate includes the pensioner's principal home [2] and up to two hectares [2] of adjacent private land [2], | the assessable value of the real estate is the value of the portion of the principal home and land that is used for commercial purposes. Any land exceeding the two hectares of adjacent land is assessable. A valuation by a qualified valuation service provider may be necessary. |
the real estate includes the pensioner's principal home and all land on the same title More ? [67]
| a valuation by a qualified valuation service provider may be necessary if the property includes titles other than the principal home title. |
the assessable current market value of the real estate differs from the written down value, | the difference is shared between the partners and added to their recorded interests in the partnership. Unless alternative arrangements are specified in the partnership agreement, the surplus or deficit on re-evaluation is allocated in the proportions in which each partner shares in the partnership. |
Assets
Section 10.2.4 Assessing Personal Assets and Financial Investments [68]
Income and Assets Test
Chapter 9.1 Income and Assets Test Principles [69]
An asset means any property, including property outside Australia.
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:
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:
Drawings are the withdrawals of funds from a business by the proprietor during the financial year, and represent either a withdrawal of capital previously advanced to the business, or an advance on profits to be earned by the business.
The capital accounts of a business partnership record the capital contribution of each partner to the net assets of the partnership. The accounts may either:
If the capital accounts are fixed, a separate current account is kept for each partner. The partnership's current account then records the changes in the equity of each partner.
The market value of an asset [2] is the point at which a willing purchaser and a willing, but not anxious vendor, would reach agreement.
The market value of an asset is only decreased by the value of an encumbrance secured against it. The market value of an asset is not reduced by any costs which may be incurred if the asset was to be sold.
The principal home has the meaning given by subsection 5LA(1) [61] of the VEA and subsection 5LA(2) [61] of the VEA. The principal home of a person is generally the place in which they reside. In certain circumstances, however, the principal home of a person can be the place in which they formerly resided. The following property is regarded as part of the principal home.
4.9421 acres.
Private land is land of [glossary:two hectares:DEF/Two Hectares] or less, which is:
VEA → [75]
This topic provides a summary of assessable assets [2] for pensions that relate to sole traders [2] and partnerships [2].
The following table summarises the assessable assets, and their treatment, from a sole trader's or a partnership's business for pensioners.
More → [78]
Asset |
Treatment |
Principal home [2]. |
Remove it from the balance sheet along with any associated liability, after apportioning where necessary. |
Portion of home used exclusively for business purposes. |
Include it as part of the assessable asset value of the business. Note: If the business is associated with satisfying the criteria for the effective land use test [2], then the part of the home used to run that business will not be assessed. |
Petty cash and financial investments [2] used as part of the ongoing operations of the business listed as business assets. |
Treat them as the assets of the business and include them when calculating the overall value of the business. |
Financial investments not used as part of the operations of the business. |
Assess them as personal financial assets of the pensioner. Take them out of the business financial statements. |
Goodwill. |
Include it when valuing a business. In most cases the value shown in the balance sheet can be used. Reassess this value if the pensioner provides evidence of a different value, or on the sale or transfer of the business where an updated market valuation should be obtained. Advice from the fomer Australian Valuation Office regarding the valuation of goodwill is - . “Goodwill” on the balance sheet usually refers to the goodwill purchased when the business is acquired, and is the difference between this historic purchase price and the value of the business' identifiable assets. Balance sheets of small businesses are usually prepared on a historical cost basis, so the net assets or equity value may not correlate with the current market value. The market value of a business' goodwill is the residual amount after deducting the market value of the identifiable assets from the market value of the business. The market value of the business (e.g. in the absence of an open sale, such as on transfer to a family member) can be determined by examining the likely future cash flow. Future cash flow can be estimated by examining the business' recent performance (preferably over the last three years) as summarised in the profit and loss statement and balance sheets. Income and expenditure needs to be normalised by removing one-off or abnormal revenue and costs. Further amendment may be necessary when valuing owner-operated businesses as these often do not include appropriate wages for themselves or family members. For a small business, the market value (including goodwill) is usually determined by applying an appropriate multiple to the normalised earnings. The market value of the goodwill can then be determined by deducting the market value of the identifiable assets from the market value of the business.
Where a small business is sold on the open market involving a transaction between a willing but not anxious seller and buyer, at arms length to each other, the transaction value can be accepted as the current market value. Where a small business is transferred or gifted to a family member or another person, advice of the current market value (including goodwill) based on the above approach should be sought from a professional business valuer. The cost of full business valuations involving a detailed examination of financial statements, will generally exceed the usual cost of desktop valuations done by a property valuer. Accordingly, appropriate management approval should be obtained before seeking a business valuation. |
Amortisation |
Amortisation is a balance sheet entry which acts to reduce the book value of an intangible asset (such as a patent, copyright or goodwill) in the same way that depreciation reduces the book value of a real asset such as plant or property over time. Amortisation is not accepted as a reduction against the business income. More → [79]
However, an amortisation entry can be accepted as reducing asset value, where there is corresponding evidence which satisfies the delegate that the value of the intangible asset has declined. As an example, a goodwill amount which historically reflects the component of the market value of the business, over and above the net asset value of the business, may be reduced by an amortisation entry where the owner or accountant believes that the market value of the business has declined. Where there is supportive evidence that the market value has declined, such as a reduction in trade or profitability, the amortisation amount can be accepted. Where there is no supportive evidence, a valuation from a professional business valuer may be needed. As with goodwill valuations (above), the verification of the reasonableness of amortisation of intangible asset value may require a detailed analysis of the business' financial statements, trading performance and profitability over time. The cost of obtaining a business valuation will generally exceed the usual cost of desktop valuations done by a property valuer. Accordingly, appropriate management approval should be obtained before seeking a business valuation. |
The date of effect policy for sole trader and partnership asset value, where annual reviews are undertaken following the receipt of an income tax return or completed financial statements.
More → [80]
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:
The owner is:
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:
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:
The principal home has the meaning given by subsection 5LA(1) [61] of the VEA and subsection 5LA(2) [61] of the VEA. The principal home of a person is generally the place in which they reside. In certain circumstances, however, the principal home of a person can be the place in which they formerly resided. The following property is regarded as part of the principal home.
Making effective use of land means that if the land has a potential commercial use (e.g. as a farm), the person must be making use of the land in order to generate an income.
According to section 5J of the VEA, a financial investment means:
but does not include an investment in an FHSA (within the meaning of the First Home Saver Accounts Act 2008) or a designated NDIS amount.
VEA ? [87]
This topic provides a summary of assessable assets [2] for pensions that relate to sole traders [2] only.
The following table summarises the assessable assets, and their treatment, from a sole trader's business for pensioners.
More ? [88]
Asset |
Treatment |
Business assets |
Assess the current market value [2] of business assets, less 'business' liabilities, under section 52C [10] of the Veterans' Entitlements Act |
Loans to the business by the pensioner |
|
Loans to the business by persons other than the owner |
|
Loans by the business to the owner |
Disregard them when calculating the assessable value of the business. |
Loans by the business to persons other than the owner |
|
Asset |
Treatment |
Non-business assessable assets providing security for business liabilities where the business has a net deficiency |
Deduct the amount of the deficiency from the value of the assessable assets. |
Income equalisation deposits, farm management deposits, farm management bonds |
These are not allowed as deductions and should be added back to the net profit in the year originally earned.
No deduction is allowed for investment expenses. |
Provision Account |
Add the value back into the net assets of the partnership. |
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:
The owner is:
The market value of an asset [2] is the point at which a willing purchaser and a willing, but not anxious vendor, would reach agreement.
The market value of an asset is only decreased by the value of an encumbrance secured against it. The market value of an asset is not reduced by any costs which may be incurred if the asset was to be sold.
VEA ? [92]
This topic provides a summary of assessable assets [2] for pensions that relate to partnerships [2] only.
The following table summarises the assessable assets, and their treatment, from a partnership's business for pensioners.
Asset |
Treatment |
Business assets |
|
Loans to the business by a partner |
|
Loans to the business by persons other than a partner |
|
Loans by the business to a partner |
Include them as assets when calculating the overall value of the business, but deduct the pensioner's loan from the assessable value of the interest in the business. |
Loans by the business to persons other than the owner |
Assess them as the personal financial investments of the partners in the proportion to which they share these assets. |
Non-partnership assessable assets providing security for business liabilities where the business has a net deficiency |
Deduct the pensioner's share of the amount of the deficiency from the value of the assessable assets providing security. |
Value if the pensioner's share of interest in the partnership is a deficiency, but their spouse's interest in the same partnership has an assessable value |
|
An asset means any property, including property outside Australia.
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:
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:
Profit, for a business, is the amount of earnings in excess of its expenses over 12 months.
According to Section 5E(2) [94]of the VEA [94]a person is a member of a couple, if they are:
The term “partnered” is also commonly used.
Links
[1] https://clik.dva.gov.au/user/login?destination=node/16400%23comment-form
[2] https://clik.dva.gov.au/%23
[3] http://clik/health-procedure-library/health-information-and-management-notes-himn/vhc/072014-vhc-veterans-home-care
[4] https://clik.dva.gov.au/user/login?destination=node/16442%23comment-form
[5] https://clik.dva.gov.au/book/export/html/16400#tgt-cspol_part10_ftn345
[6] https://clik.dva.gov.au/book/export/html/16400#tgt-cspol_part10_ftn346
[7] https://clik.dva.gov.au/book/export/html/16400#tgt-cspol_part10_ftn347
[8] https://clik.dva.gov.au/book/export/html/16400#tgt-cspol_part10_ftn348
[9] https://clik.dva.gov.au/book/export/html/16400#tgt-cspol_part10_ftn349
[10] https://clik.dva.gov.au/service-eligibility-assistant-updates/all-determinations-order-date-signed-oldest-most-recent/determinations-under-vea
[11] https://clik.dva.gov.au/book/export/html/16400#ref-cspol_part10_ftn345
[12] https://clik.dva.gov.au/compensation-and-support-policy-library/part-10-types-income-and-assets/101-ordinary-income/1016-income-property/income-real-estate
[13] https://clik.dva.gov.au/compensation-and-support-policy-library/part-10-types-income-and-assets/101-ordinary-income/1016-income-property/income-boarders-or-lodgers
[14] https://clik.dva.gov.au/book/export/html/16400#ref-cspol_part10_ftn346
[15] https://clik.dva.gov.au/book/export/html/16400#ref-cspol_part10_ftn347
[16] https://clik.dva.gov.au/compensation-and-support-policy-library/part-10-types-income-and-assets/101-ordinary-income/1013-income-exempt-assessment
[17] https://clik.dva.gov.au/book/export/html/16400#ref-cspol_part10_ftn348
[18] https://clik.dva.gov.au/compensation-and-support-policy-library/part-11-administration-payments/111-income-support-effective-dates-and-pension-periods/1114-determining-effective-dates-variations-and-terminations/date-effect-annual-reviews
[19] https://clik.dva.gov.au/book/export/html/16400#ref-cspol_part10_ftn349
[20] https://clik.dva.gov.au/user/login?destination=node/16555%23comment-form
[21] https://clik.dva.gov.au/book/export/html/16400#tgt-cspol_part10_ftn350
[22] https://clik.dva.gov.au/book/export/html/16400#tgt-cspol_part10_ftn351
[23] https://clik.dva.gov.au/book/export/html/16400#tgt-cspol_part10_ftn352
[24] https://clik.dva.gov.au/book/export/html/16400#tgt-cspol_part10_ftn353
[25] https://clik.dva.gov.au/book/export/html/16400#ref-cspol_part10_ftn350
[26] https://clik.dva.gov.au/book/export/html/16400#ref-cspol_part10_ftn351
[27] https://clik.dva.gov.au/book/export/html/16400#ref-cspol_part10_ftn352
[28] https://clik.dva.gov.au/book/export/html/16400#ref-cspol_part10_ftn353
[29] https://clik.dva.gov.au/user/login?destination=node/16386%23comment-form
[30] https://www.legislation.gov.au/Series/C2004A03268
[31] https://guides.dss.gov.au/social-security-guide/acronyms#ato
[32] https://clik.dva.gov.au/user/login?destination=node/16321%23comment-form
[33] https://clik.dva.gov.au/book/export/html/16400#tgt-cspol_part10_ftn361
[34] https://clik.dva.gov.au/book/export/html/16400#ref-cspol_part10_ftn361
[35] https://clik.dva.gov.au/user/login?destination=node/16504%23comment-form
[36] https://clik.dva.gov.au/book/export/html/16400#tgt-cspol_part10_ftn362
[37] https://clik.dva.gov.au/book/export/html/16400#ref-cspol_part10_ftn362
[38] https://clik.dva.gov.au/user/login?destination=node/16397%23comment-form
[39] https://clik.dva.gov.au/book/export/html/16400#tgt-cspol_part10_ftn363
[40] https://clik.dva.gov.au/book/export/html/16400#tgt-cspol_part10_ftn364
[41] clik://CSPOL/9.5.4/Description - Loans, Bills, Debentures, Notes, Bullion & Equalisation Deposits
[42] https://clik.dva.gov.au/book/export/html/16400#ref-cspol_part10_ftn363
[43] https://clik.dva.gov.au/book/export/html/16400#ref-cspol_part10_ftn364
[44] https://clik.dva.gov.au/user/login?destination=node/16382%23comment-form
[45] https://clik.dva.gov.au/book/export/html/16400#tgt-cspol_part10_ftn365
[46] https://clik.dva.gov.au/book/export/html/16400#tgt-cspol_part10_ftn366
[47] https://clik.dva.gov.au/book/export/html/16400#tgt-cspol_part10_ftn367
[48] https://clik.dva.gov.au/book/export/html/16400#tgt-cspol_part10_ftn368
[49] https://clik.dva.gov.au/book/export/html/16400#tgt-cspol_part10_ftn369
[50] https://clik.dva.gov.au/book/export/html/16400#tgt-cspol_part10_ftn370
[51] https://clik.dva.gov.au/book/export/html/16400#ref-cspol_part10_ftn365
[52] https://clik.dva.gov.au/book/export/html/16400#ref-cspol_part10_ftn366
[53] https://clik.dva.gov.au/compensation-and-support-policy-library/part-10-types-income-and-assets/102-assets
[54] https://clik.dva.gov.au/book/export/html/16400#ref-cspol_part10_ftn367
[55] https://clik.dva.gov.au/compensation-and-support-policy-library/part-10-types-income-and-assets/102-assets/1022-determining-value-asset
[56] https://clik.dva.gov.au/book/export/html/16400#ref-cspol_part10_ftn368
[57] https://clik.dva.gov.au/compensation-and-support-policy-library/part-10-types-income-and-assets/102-assets/1024-assessing-personal-assets-and-investments/assets-value-property-and-real-estate
[58] https://clik.dva.gov.au/book/export/html/16400#ref-cspol_part10_ftn369
[59] https://clik.dva.gov.au/compensation-and-support-policy-library/part-9-principles-determining-pension-rate/92-residential-situation/923-additional-assessment-rules-certain-types-residences/private-land-use-test
[60] https://clik.dva.gov.au/book/export/html/16400#ref-cspol_part10_ftn370
[61] http://clik.dva.gov.au/legislation-library
[62] http://clik.dva.gov.au/node/32981
[63] https://clik.dva.gov.au/user/login?destination=node/16531%23comment-form
[64] https://clik.dva.gov.au/book/export/html/16400#tgt-cspol_part10_ftn371
[65] https://clik.dva.gov.au/book/export/html/16400#tgt-cspol_part10_ftn372
[66] https://clik.dva.gov.au/book/export/html/16400#tgt-cspol_part10_ftn373
[67] https://clik.dva.gov.au/book/export/html/16400#tgt-cspol_part10_ftn374
[68] https://clik.dva.gov.au/compensation-and-support-policy-library/part-10-types-income-and-assets/102-assets/1024-assessing-personal-assets-and-investments
[69] https://clik.dva.gov.au/compensation-and-support-policy-library/part-9-principles-determining-pension-rate/91-income-and-assets-test-principles
[70] https://clik.dva.gov.au/book/export/html/16400#ref-cspol_part10_ftn371
[71] https://clik.dva.gov.au/book/export/html/16400#ref-cspol_part10_ftn372
[72] https://clik.dva.gov.au/book/export/html/16400#ref-cspol_part10_ftn373
[73] https://clik.dva.gov.au/book/export/html/16400#ref-cspol_part10_ftn374
[74] https://clik.dva.gov.au/user/login?destination=node/16508%23comment-form
[75] https://clik.dva.gov.au/node/16508/edit#tgt-cspol_part10_ftn375
[76] https://www.comlaw.gov.au/Series/C2004A03268
[77] https://clik.dva.gov.au/node/16508/edit#ref-cspol_part10_ftn375
[78] https://clik.dva.gov.au/node/16508/edit#tgt-cspol_part10_ftn376
[79] https://clik.dva.gov.au/node/16508/edit#tgt-cspol_part10_ftn377
[80] https://clik.dva.gov.au/node/16508/edit#tgt-cspol_part10_ftn378
[81] https://clik.dva.gov.au/compensation-and-support-policy-library/part-10-types-income-and-assets/102-assets/1023-disregarded-assets
[82] https://clik.dva.gov.au/node/16508/edit#ref-cspol_part10_ftn376
[83] clik://CSPOL/10.3.12/Allowable & Non-allowable Income Deductions
[84] https://clik.dva.gov.au/node/16508/edit#ref-cspol_part10_ftn377
[85] https://clik.dva.gov.au/node/16508/edit#ref-cspol_part10_ftn378
[86] https://clik.dva.gov.au/user/login?destination=node/16329%23comment-form
[87] https://clik.dva.gov.au/book/export/html/16400#tgt-cspol_part10_ftn379
[88] https://clik.dva.gov.au/book/export/html/16400#tgt-cspol_part10_ftn380
[89] https://clik.dva.gov.au/book/export/html/16400#ref-cspol_part10_ftn379
[90] https://clik.dva.gov.au/book/export/html/16400#ref-cspol_part10_ftn380
[91] https://clik.dva.gov.au/user/login?destination=node/16457%23comment-form
[92] https://clik.dva.gov.au/book/export/html/16400#tgt-cspol_part10_ftn381
[93] https://clik.dva.gov.au/book/export/html/16400#ref-cspol_part10_ftn381
[94] http://www.comlaw.gov.au/Series/C2004A03268