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  • What to include in your assessable income

    Generally, when calculating the assessable income of your business you need to include all of your gross earnings or proceeds resulting from the ordinary course of your business, not just your profit. There are also a number of other payments, which may not be part of the everyday running of your business which you will need to include in your assessable income.

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    Foreign income

    You must report all income you receive from overseas business activities on your Australian tax return if you're an Australian resident. The tax treatment of your income depends on a number of factors, including the specific country where you received income.

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    Personal services income

    Personal services income (PSI) is income produced mainly from an individual's personal skills or efforts as an individual. Income is classified as PSI when more than 50% of the amount received by a business for a contract was for an individual's labour, skills or expertise.

    If your business receives PSI, you need to 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.

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    Crowdfunding

    Crowdfunding is the practice of using the internet and/or social media 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, depending on the nature of the arrangement, your role in it, and your circumstances.

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    Income sourced through the sharing economy

    The sharing economy allows people to connect with others to complete various transactions including sharing resources or assets, providing services or crowdfunding. These transactions generally occur online or through smart devices.

    If you earn or receive money, goods or services through the sharing economy some or all of it may be assessable income, depending on the nature of the arrangement, your role in it, and your own circumstances. This includes tips or gratuities paid in cash and electronic transfer.

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    Payments outside of ordinary business activities

    As part of running your business you may sell non- trading stock assets, such as land, buildings, office furniture and equipment. You may also take some of your trading stock for your own use or sell goods or services and receive something other than money as payment.

    At the end of each income year, you will need to work out if you earned assessable income as part of these actions.

    Your assessable income will include:

    • the amount you receive over the written-down value when selling certain depreciating assets
    • the net capital gains from selling certain capital assets, such as land or buildings
    • the value of goods you take from trading stock for your own private use
    • any increase in your trading stock's value over the year, that is the value of trading stock on hand at the end of the income year minus the value of trading stock on hand at the start of the year
    • the market value of any transactions not involving money, such as barter transactions.

    Payments you receive from activities outside the ordinary course of running your business may also need to be included as assessable income. Two such examples are:

    • payments you receive from isolated transactions outside the ordinary course of your business, if the intention of the transaction is to make a profit
    • prizes or awards for your business, such as a cash prize for being the best business in your region.

    If you are not sure whether a payment you receive needs to be included in your assessable income, ask a tax professional or contact us.

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    Government payments

    Some specific payments, grants and subsidies that you receive from government will also need to be included in your assessable income. These payments include:

    • fuel tax credits, product stewardship (oil) benefit and the cleaner fuels grant
    • wine equalisation tax producer rebate
    • excise refund scheme for alcohol manufacturers
    • grants, such as an amount you receive under the Apprenticeship Incentives Program
    • subsidies for running a business.

    Commissions, investment earnings, gratuities and compensation payments

    If you receive commissions, dividends, gratuities or compensation payments as part of your business activities you will need to 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 (credits from company tax already paid) on business investments
    • rental income from property owned by your business
    • lease payments and hire charges
    • tips and gratuities, including cash or electronic payments
    • compensation, such as workers’ compensation, or payments for trading stock losses, business interruptions or contract cancellations
    • recovered bad debts for which you have received a tax deduction.
    Last modified: 22 Sep 2017QC 44460