4.7.1.10 General Provisions for Sole Traders & Partnerships

Summary

This topic provides information on the following:

  • assessable income and assets for sole traders (1.1.S.225) and partnerships (1.1.P.95),
  • operating a business as a sole trader or partnership,
  • assessment of business income, and
  • GST interaction with income from a business.

Assessable income & assets for sole traders & partnerships

Assessable income and assets for sole traders and partnerships are almost identical, except that:

  • sole traders receive ALL of the income from their business, either as wages or profit (1.1.P.428), and
  • partners in a business ONLY receive an agreed portion of the profit from the business, as determined by the partner.

Operating a business as a sole trader or partnership

The provisions in this topic are only concerned with sole traders and partners who are operating a business. The following table describes when a person is considered to be operating a business.

If the person… Then they are…
is carrying on a trade, occupation or profession as an on-going concern, operating a business.
obtains rent from:
  • a leased property, or
  • a lodger,
NOT operating a business, but are obtaining income from a profit making transaction.

Explanation: The income assessed is the profit from the transaction, after taking into account the expenses incurred in obtaining the income.

Act reference: SSAct section 8(1) Income test definitions

Policy reference: SS Guide 4.3.8.30 Income from Real Estate, 4.3.8.40 Income from Boarders or Lodgers

Assessment of business income

For information on this topic refer to 4.7.1.20.

GST interaction with income from a business

For information on this topic refer to 4.7.5.30.

Last reviewed: 7 November 2016