The Guides to Social Policy Law is a collection of publications designed to assist decision makers administering social policy law. The information contained in this publication is intended only as a guide to relevant legislation/policy. The information is accurate as at the date listed at the bottom of the page, but may be subject to change. To discuss individual circumstances please contact Services Australia.

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: