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  • What to include in your assessable income

    Generally, when calculating assessable income for your business, you need to include all your gross earnings or proceeds resulting from the ordinary course of your business. There are also a number of other payments, which may not be part of the everyday running of your business, which need to be included 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 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 via online platforms (app or website).

    If you earn income through the sharing economy, some or all of it may be assessable income.

    Income tax and goods and services tax (GST) obligations depend on what goods or services you are providing, and how much you earn, through the sharing economy.

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    Cash income

    If you receive cash payments for goods or services, declare the cash as assessable income.

    Our data matching analysis and forensic capabilities are very sophisticated, making cash payments more visible. For example, we can identify people who may be running a part of their normal business activities off the books and avoiding their obligations.

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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 gain you made when disposing of a business asset, such as land or building, by way of sale, gift or transfer
    • 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 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
    • 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: 26 Jun 2018QC 44460