• P8 Business income and expenses

    Attention

    Warning:

    This information may not apply to the current year. Check the content carefully to ensure it is applicable to your circumstances.

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    This item has three sections:

    The amounts to be included in the Income and Expenses sections of item P8 are amounts derived from your accounting system or financial statements, except for:

    • the values of opening and closing stock, which are to be shown at tax values as explained under Opening stock, and
    • depreciation expenses for small business entities choosing to use the simplified depreciation rules, which are to be shown at tax values as explained under Depreciation expenses.

    The income and expense amounts to be included at item P8 should form part of your profit and loss statement and are the basis for calculating your net profit or loss. You should deal with any adjustments to these amounts for tax purposes in the Reconciliation items section of item P8.

    Attention

    Former STS taxpayers

    If you are eligible and are continuing to use the STS accounting method, you must complete the income and expenses sections using the STS accounting method. See Former STS taxpayers.

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    Danger

    Stop

    You show personal services income and related expenses at item P1, with one exception - personal services income subject to foreign resident withholding - which you show at this item.

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    Income

    The business income to be shown at item P8 is divided into:

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    Stop

    Do not show the following types of income at item P8:

    • gross interest - show the amount of income at item 10 on your tax return
    • dividends and franking credits - show the amounts at item 11 on your tax return
    • distributions from partnerships and trusts - show these at item 13 on your tax return (supplementary section)
    • gross rental or similar income that is not derived from carrying on a business of renting property, such as agistment or hire fees - show the amount at item 21 on your tax return (supplementary section)
    • net capital gains - show the amount at item 18 on your tax return (supplementary section)
    • PSI shown at P1
    • farm management withdrawals - show the amount at item 17 on your tax return (supplementary section)
    • attributed foreign income - show the amount at item 19 on your tax return (supplementary section)
    • foreign source income - show the amount at item 20 on your tax return (supplementary section).
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    Goods and services tax

    If you are registered or required to be registered for GST, the following apply:

    • For income tax purposes, you should exclude GST from assessable income, exempt income and amounts received or receivable that you take into account in calculating income and deductions.
    • You should reduce deductible losses and outgoings by the amount of input tax credit entitlement.
    • In certain circumstances, for example, if there was a change in how much you used an asset for business purposes, an adjustment for GST purposes results in an amount being included in assessable income (if the adjustment is a GST-decreasing adjustment) or being deductible (if the adjustment is a GST-increasing adjustment).
    • You should also exclude GST components under other specific rules including capital gains tax (cost base, reduced cost base, capital proceeds) and termination values.

    If you are not registered or required to be registered for GST, you do not need to adjust your income and deductions for GST. You can claim the GST inclusive amount incurred on deductible outgoings.

    Attention

    Former STS taxpayers

    If you are eligible and are continuing to use the STS accounting method, you must complete the income and expenses sections using the STS accounting method. See Former STS taxpayers.

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    What you may need

    Did you have amounts withheld from your business income - other than PSI included at item P1?

    No

    Go to Assessable government industry payments.

    Yes

    Read on.

    If tax has been withheld from business income you should have received a payment summary.

    You will need to complete the Individual PAYG payment summary schedule 2010 before completing item P8 if you received any of the following payment summaries:

    The PAYG payment summary - business and personal services income allows reporting of different payment types (including voluntary agreement, labour hire or other specified payments). When completing the Individual payment summary schedule you must specify on the schedule the nature of the income and the payment type made to you.

    For further information refer to the next section How to complete the Individual PAYG payment summary schedule 2010.

    A payer may issue a receipt, remittance or similar document in place of the PAYG payment summary - withholding where ABN not quoted.

    If you received income from which tax was withheld and you did not receive or have lost your payment summary, contact your payer and ask for a copy.

    How to complete the Individual PAYG payment summary schedule 2010

    Attention

    Remember

    If you have both business income (item P8) and personal services income (item P1) you will need to complete an Individual PAYG payment summary schedule 2010 for each type of income.

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    Step 1 Write your TFN and name in the appropriate boxes at the top of the schedule.

    Step 2Nature of income - Print X in the Business income box.

    Step 3 For each payment summary, transfer the following information to the schedule:

    • the type of withholding - look at your payment summary carefully to determine its type and complete the Type box, using the following key:
      V
      voluntary agreement
      S
      labour hire or other specified payments
      N
      withholding where ABN not quoted
      F
      foreign resident withholding
    • the payer's ABN or withholding payer number (WPN) and the payer's name in the appropriate boxes
    • the total tax withheld in the Tax withheld box
    • the gross payment in the Gross payment box.

    Step 4 Check that you have recorded details from all relevant payment summaries on your payment summary schedule then attach the schedule to page 3 of your tax return.

    Do not attach the payment summaries to your tax return. You must keep them for a period of five years.

    Payers must report to the ATO details of payments where amounts of tax have been withheld. This information will be cross-checked with that on your tax return to make sure that you have declared the correct amount of income and the correct amount of tax withheld.

    Last modified: 25 Oct 2011QC 27987