Income and deductions for small business

Example: working out assessable income

Sole trader

Bill is a sole trader. During the income year, he received the following:

Assessable income
Sale of toys (excluding GST)	$110,405
Interest on business bank account	$45
Total assessable business income	$110,450

Other assessable income
Income from rental property	$13,000
Franked dividends	$980
Total assessable income	$124,430

Non-assessable income
Hobby income (home-baked bread)	$1,200
Lotto win	$3,280

When working out his assessable income, Bill does not include the $1,200 from the sale of his home-baked bread or his $3,280 lottery winnings as these amounts are not assessable.

While the $13,000 from his rental property and the $980 from franked dividends are not business income, as a sole trader, Bill must include these amounts in his assessable income on his tax return. However, he records the amounts separately for accounting purposes.

He did not make any capital gains and he is not entitled to any of the special concessions for primary producers or special professionals. Also, he did not earn any income from outside of Australia. Therefore, Bill's total assessable income is $124,430.

Bill is not taxed on his assessable income, but on his taxable income. This includes all his assessable income, less the deductions he can claim.

Sections within Working out your assessable income

• What to include in your assessable income
• What not to include in your assessable income
• Small business concessions
• Trading stock
• Separating your business and personal income
• Accounting methods
• Contractors and consultants
• Capital gains
• Primary producer or special professional income
• Income you earned from outside Australia
• Example: working out assessable income