Last modified: 11 June 2020
What to include in your business’s assessable income
When calculating your business’s assessable income, include:
- all gross income (before tax) from your everyday business activities, including sales made over the internet, income from sales (cash and electronic) and foreign income. Gross income doesn’t include goods and services tax (GST).
- all other business income that is not part of your everyday business activities, including changes in the value of trading stock, capital gains, isolated transactions intended to make a profit, and cash prizes for your business.
If you aren’t sure how this information applies to your situation, ask a registered tax professional or contact us for help. We will help you get back on track if you make an error.
On this page:
- Cash income
- Commissions, investment earnings, gratuities and compensation payments
- Income not part of everyday business activities
- Government payments
- Capital gains and losses
- Income from online activities
- Income from the sharing economy
- Income from crowdfunding
- Personal services income
- Foreign income
If your business receives cash payments for goods or services, you must declare them as assessable income. Include:
- all your cash earnings
- income your business earned through coupons, vouchers or gift cards
- income your business deposited into a mortgage or private credit card
- bank interest, dividends, franking credits, etc.
Our data matching analysis and forensic capabilities are very sophisticated, making cash payments more visible to us. For example, we can identify people who may be running a part of their normal business activities off the books and avoiding their obligations.
To keep it fair for the majority of businesses that do the right thing, we deal with those who try to operate outside the tax system. However, even when we take strong action, we remain willing to work with the business or their representative to help them to report their income and deductions correctly.
Your business income may include the:
- funds or the Australian dollar value of property you received through the disposal of cryptocurrency in the ordinary course of your business
- Australian dollar value of cryptocurrency you received for goods or services you provide as part of your business.
For more information, see Tax treatment of cryptocurrencies.
If you receive commissions, investment earnings (such as dividends), gratuities or compensation payments as part of your business activities, include these amounts as assessable income. These payments include:
- commission income
- royalties, such as payments when other entities use your patent
- incentive payments, such as a cash payment to lease business premises
- interest on business investments, and interest on overpayment or early payment of tax
- dividends and franking credits (from company tax already paid) on business investments
- rental income from property owned by your business
- lease payments and hire charges (if you are in the business of hiring out assets)
- tips and gratuities, including cash or electronic payments
- compensation, such as workers compensation, payments for trading stock losses, business interruptions or contract cancellations
- recovered bad debts for which you have received a tax deduction.
Your business may receive income that is not part of your everyday business activities. These amounts must also be included in your business’s assessable income at the end of the income year.
Examples of income that is not part of your everyday business activities
Disposal of non-trading stock assets
If you sell some of your business’s non-trading stock assets, such as land, buildings, office furniture or equipment, include the following in your assessable income:
- For depreciating assets (those that decline in value over time, such as motor vehicles and equipment) – include the amount you received minus the written-down value (that is, the adjustable value of the asset at the time you sell it).
- For other capital assets (those that don’t decline in value over time, such as land) – include the net capital gain you made through sale, gift or transfer.
Taking some of your trading stock for your own use
If you take some of your business’s trading stock for your own use, include the value of the goods you take in your assessable income.
Sale of goods or services in return for something other than money
If you sell goods or services and receive something other than money, such as a barter transaction, then include the market value of what you received as payment in your assessable income.
Increase in trading stock value
If, during the income year, there is an increase in your trading stock’s value, include the amount of the increase in your assessable income.
The increase will be the value of your trading stock on hand at the end of the income year minus the value of your trading stock on hand at the start of the year.
Isolated transactions intended to make a profit
If you receive a payment from an isolated transaction outside the ordinary course of your business where the intention of the transaction was to make a profit, include the payment amount in your assessable income.
Business prizes or awards
If your business receives a prize or award, such as a cash prize for being the best business in your region, include the amount in your assessable income.
Payments from insurance claims
If your business receives a payment from an insurance claim related to your business, include the amount in your assessable income.
If you aren’t sure whether a payment you receive needs to be included in your assessable income, ask a registered tax professional or contact us for help.
A number of Australian Government, state and territory government grants and payments have been made available to businesses in response to recent natural disasters and COVID-19. Only those grants and payments that are assessable income will need to be included.
These payments include:
- fuel tax credits or product stewardship (oil) benefit
- wine equalisation tax producer rebate
- JobKeeper payments (COVID-19)
- Supporting Apprentices and Trainees wage subsidy (COVID-19)
- excise refund scheme for alcohol manufacturers
- grants, such as an amount you receive under the Australian Apprenticeships Incentives Program
- subsidies for carrying on a business.
Do not include the following grants and payments:
- cash flow boost payments (COVID-19) (non -assessable, non-exempt income)
- government grants and payments that are tax free.
Capital gains or losses can occur when you dispose of a business capital asset by way of sale, gift, transfer, destruction, surrender, or other means. Business capital assets are all assets your business owns. However, you can only generally make a capital gain or loss on particular assets, such as your business premises, land, goodwill, or rights or licences. You can’t generally make a capital gain or loss on your trading stock.
Working out your capital gain or loss
When working out the capital gain or loss on disposal of an asset, you also need to take into account the expenses of building improvements and capital works deductions previously claimed.
Your net capital gain is your total capital gains for the year, less:
- total capital losses for the year
- net capital losses carried forward from earlier years
- CGT concessions you are eligible for.
You must include any net capital gain you made during the income year in your assessable income. If you have a net capital loss (rather than a gain) at the end of the income year, you can’t use it to reduce your assessable income in that year. However, you can carry it forward to offset future capital gains.
If you operate your business as a company or trust, and you sell or otherwise dispose of your shares in the company or your interest in the trust, you will make either a capital gain or loss. Include this in your personal assessable income.
You must keep records of everything that may be relevant to working out whether you have made a capital gain or loss from a capital asset.
Capital gains tax implications
All assets you’ve acquired since 20 September 1985 – when capital gains tax (CGT) started – are subject to CGT unless specifically excluded.
For example, CGT applies to:
- real estate
- leases, goodwill and licences.
CGT generally doesn’t apply to depreciating assets, such as tools or motor vehicles that you use in your business.
In certain circumstances, the following discounts apply to CGT:
- Individuals or trusts qualify for a 50% discount if they hold an asset for at least 12 months before disposing of it. This means you include only 50% of the capital gain in your assessable income.
- Companies aren’t entitled to a CGT discount.
- Partnerships don’t pay tax on capital gains. Instead, the individual partners determine their share of the capital gain, when working out their net capital gain, and include it in their personal assessable income.
- If you’re a small business that owns active assets, you may also be eligible for the small business CGT concessions (See the meaning of active asset).
If you conduct some or part of your business online, and receive income from those business activities, include these amounts as assessable income.
If you earn income through the sharing economy, some or all of it may be assessable income. The sharing economy is economic activity through a digital platform (such as a website or an app) where people share assets or supply services for a fee.
Crowdfunding uses the internet or social media platforms, mail-order subscriptions, benefit events and other methods to find supporters and raise funds for a project or venture.
If you earn or receive any money through crowdfunding, some or all of it may be assessable income. This depends on the nature of the arrangement, your role in it and your circumstances.
Personal services income (PSI) is income produced mainly from an individual’s personal skills or efforts. Income is classified as PSI when more than 50% of the amount received by a business for a contract (or work done for a person or another business) was for an individual’s labour, skills or expertise.
If your business receives PSI, work out if special tax rules (the PSI rules) apply to that income. If the PSI rules apply, they will affect who reports the PSI to us and the deductions that can be claimed.
You can use the PSI tool to work out:
- whether PSI was received
- if the PSI rules apply.
If you’re an Australian resident, you must report all income you receive from overseas business activities on your Australian tax return. How we tax this income depends on a number of factors, including the country from which you received the income.