ato logo
Search Suggestion:

What to include in your business's assessable income

What to include in your assessable income from carrying on your business.

Last updated 30 July 2023

Business's assessable income

Media:Reporting Income (for businesses)
https://tv.ato.gov.au/ato-tv/media?v=bi9or7odhsw866External Link (Duration: 01:08)

If you are an individual not in business, see what income you need to declare.

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)
    • foreign income
     
  • all other business income that is not part of your everyday business activities, including  
    • government payments that are assessable
    • changes in the value of trading stock
    • capital gains
    • isolated transactions intended to make a profit
    • cash prizes for your business.
     

Gross income doesn't include goods and services tax (GST).

If you carry on a business and also earn income from salary and wages as someone else's employee, this is not included as business income in your tax return. Rather it is included as salary and wages income.

Your business's structure and income will also determine your other tax registrations and obligations.

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.

Cash and cash equivalent income

If your business receives cash payments for goods or services, you must declare them as assessable income.

This includes:

  • all your cash earnings
  • income your business earned through coupons, vouchers or gift cards
  • tips or gratuities (which may be described as gifts) and subscription payments and fees your business earned
  • income your business deposited into a mortgage or private credit card
  • bank interest, dividends (including any franking credits).

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 most businesses that do the right thing, we deal with those who try to operate outside the tax system – also known as the shadow economy. 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.

Non-cash income and barter transactions

In return for goods, services, or other products you provide as part of your business you may receive goods, services or other products or benefits. This is often referred to as a barter transaction. You may also receive tips or gratuities (these may be referred to as gifts) or something similar. For example, digital assets, such as cryptocurrencies.

If you receive goods, services or other benefits as full or part payment for your goods or services or as a tip or gratuity, their market value is included as income in your tax return.

Types of goods or services you may receive include:

  • clothing, jewellery or accessories
  • make up or skin care products
  • gaming products
  • flights or accommodation
  • products or service provided by another organisation
  • digital assets, such as cryptocurrency and NFTs
  • other benefits you have received instead of money.

In most cases, we will accept as a market value the cash price that the taxpayer would normally have charged a stranger for the services or for the sale of the goods or property.

Start of example

Example: receiving goods as payment for services

Janet runs a business doing reviews, endorsing products for new mothers and providing general parenting advice.

Baby Bo Co asks Janet to promote their baby seat to her subscribers. She agrees and Baby Bo Co gives her a new car seat and pram. The retail cost of the car seat is $150 and the pram is $2,000.

In total, Janet would include $2,150 income in her tax return from this arrangement.

End of example

Money or other considerations in barter transactions

A special rule applies to work out the amount included in your assessable income if you agree to provide money (or other consideration) in addition to the primary good or service you provide as part of your business in a barter transaction.

In this case, you include the market value of the goods, services or benefit received, less the amount of additional consideration you gave. This may occur when you acquire goods or services at a discount, as part of an agreement.

Start of example

Example: receiving goods at a discount in return for services

Janet runs an online business reviewing and endorsing products for new mothers and providing general parenting advice.

Baby Bo Co was pleased with a previous review Janet did on their products. They offer to sell her a cot from their premium range at cost in return for her reviewing it, if she shares the review through her online channels.

Janet accepted the offer. She bought the cot from Baby Bo Co for her child at cost ($1000). In return, she reviewed it and posted the review online through her channels. The normal retail price for the cot as offered on Baby Bo Co's website was $3,100.

Janet paid $1000 towards the purchase of the cot. She needs to include $2,100 in her return as business income. This is the retail value of the cot ($3,100), less the amount she paid ($1000).

End of example

Crypto assets

Your business income may include the:

  • market value of crypto assets (including cryptocurrency) you dispose of in the ordinary course of your business
  • Australian dollar value of crypto assets you received for goods or services you provide as part of your business.

For more information, see Crypto assets used in business.

Commissions, investment earnings, gratuities and compensation payments

If you receive commissions, investment earnings (such as dividends), gratuities, tips or compensation payments as part of your business activities, include these amounts as assessable income. You must include these even if they are received in the form of goods, services, assets or other benefits rather than cash.

These payments include:

  • commission income, including sales commissions and for promotional work, such as promoting other brands' or organisations' goods or services online
  • royalties, such as payments when other entities use your patent or copyrighted material
  • 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.

Income not part of everyday business activities

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.

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.

Depreciating assets are those that decline in value over time, such as motor vehicles and equipment. If the amount you receive minus the adjustable value of the asset when you sell it is greater than zero, include this amount. If you use simplified depreciation, different rules apply.

Other capital assets include 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.

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.

Government payments

A number of Australian Government, state and territory government grants and payments have been made available to businesses in response to natural disasters and COVID-19. Most grants and payments are assessable income and need to be included in the tax return.

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
  • assessable payments you receive from government entities for services you provided or grants you received (these payments will be reported to us as part of taxable payments reporting system).

Do not include the following grants and payments:

  • cash flow boost payments (COVID-19) – non-assessable, non-exempt income
  • other government grants and payments – including grants, payments and stimulus during COVID-19 – that are non-assessable, non-exempt income and you meet any eligibility criteria.

Capital gains and losses

You report capital gains and capital losses in your income tax return and pay tax on your net capital gains. Although it is referred to as 'capital gains tax', it is part of your income tax. It is not a separate tax.

You may have a net capital gain when you dispose of business capital assets by way of sale, gift, transfer, destruction, surrender or other means. However, you can only generally make a capital gain 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.

If you have a net capital loss (rather than a capital 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're a small business entity that owns active assets, you may also be eligible to apply the the small business CGT concessions to reduce or defer your capital gain.

Income from online activities

If you conduct some or part of your business online, and receive income from those business activities, include these amounts as assessable income.

A business that has online activities may have multiple income streams. These can include:

  • income from the sale of goods or services or digital products through an online store or platform
  • income from monetising digital content, for example, advertising revenue or creator payments from platforms
  • subscription fees you receive for access to content
  • fees from clients to watch you perform online, or view personalised content you create for them
  • tips, and gratuities (including livestream payments, such as payments from Super Chats and Super Stickers)
  • appearance fees, for example if you are paid to present or appear at seminars webinars or conferences.

If your business involves creating content and you receive advertising revenue or other payments from a hosting platform, you may continue receiving payments from existing content even if you stop making new content. These payments still need to be included as income in your tax return in the income year you receive them.

If you run your business online, you may receive income from overseas sources. If you are an Australian resident for tax purposes, you must report this income in your tax return.

Start of example

Example: include payments from online activities as income

Jordan is an Australian resident for tax purposes and runs a content creation business.

She regularly livestreams though multiple platforms as part of this business. As viewers watch her livestream, they have an opportunity to make payments directly to Jordan through these platforms in appreciation of the content.

Jordan must include these payments in her tax return as income.

End of example

Income from the sharing economy

Income you earn through the sharing economy is 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.

Income from crowdfunding

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

Income that is produced mainly from an individual's personal skills or efforts is personal services income (PSI). 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, rather than being generated by the use of assets, the sale of goods, or from a business structure.

If your business obtains 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 how you report the PSI to us and the deductions you can claim.

Foreign income

If you are an Australian resident for tax purposes, you need to include all income you receive in your tax return, whether it is from an Australian source or an overseas source.

If you are a foreign resident for tax purposes, you only pay income tax on Australian source income. You must do so even if you already paid tax on it overseas or tax was withheld overseas on your behalf. However, if you have already paid tax in the country that you received the income from, you may be able to claim a foreign income tax offset.

You must convert all foreign income to Australian dollars before including it in your tax return.

For more information see, Foreign and worldwide income.

Start of example

Example: include income from overseas sources as an Australian resident for tax purposes

Ivy is an Australian resident for tax purposes. She runs an online influencer business.

As part of her business, she receives income from overseas companies including platform payments as a YouTube partner.

Ivy also has a deal with a US based company under which she is paid to promote their products and receives a commission when customers purchase products using her affiliate link.

In the 2023–2024 income year, Ivy earned $25,000 (converted to Australia dollars) in income from the company.

When completing her income tax return for 2023–24 Ivy will include:

  • the total amount of monthly payments she received in the income as a YouTube partner
  • $25,000 income from her partnership with the company in the USA
  • all other foreign source income she received.

She may also be able to claim a foreign income tax offset if she paid tax in the USA.

End of example

Other information

To make it easier to get your tax and super right, find out more about:

QC44460