Step 1 - work out your annual turnover (for your previous or current year)
Your annual turnover includes all ordinary income earned in the ordinary course of business for the income year. Turnover refers to your gross income or proceeds, rather than your net profit.
If you operate multiple business activities, either as a sole trader or within the same business structure, you must include the income from all your activities when working out your annual turnover. For example, a sole trader operating a part time consultancy and a retail shop would include the income from both business activities when working out annual turnover.
Here are some examples of amounts included and not included in ordinary income:
Include these amounts |
Do not include these amounts |
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Special rules for calculating your annual turnover
Business operated for part of the year (starting or ceasing)
If you start or cease a business part way through an income year, you will need to work out your turnover using a reasonable estimate of what your turnover would have been if you had carried on the business for the entire income year. This rule applies for all three methods of working out whether you are a small business entity.
Retail fuel sales
You do not include retail fuel sales when calculating your turnover. This is a special rule because sales of retail fuel are characteristically high in sales volume with low profit margins.
Non-arm's length business transactions
Any income from transactions with an associate should be included in your turnover. If the dealing was not at arm's length (that is the goods or services were sold at a discounted price because of their association with you) you must use the market value of the goods or services when calculating your annual turnover.
However, you may take into account any discounts that would have been offered had the dealing been at arm's length.
Associate has the meaning given by section 318 of the Income Tax Assessment Act 1936. As an individual, your associates include but are not limited to:
- your relatives, such as your spouse or children
- a partnership that you are a partner in
- another partner in that partnership, and that partner's spouse and children
- a trustee of a trust that you, or your associate, are a beneficiary of, and
- a company that you, or your associate, control or influence.
There are similar rules to determine who is an associate of a company, partnership and trustee.
If the aggregation rules do not apply to you, your aggregated turnover will be the same as your annual turnover. You do not need to read any further. If you must consider the aggregation rules, or are not sure if they apply to you, go to step 2.
Step 2 - consider the aggregation rules
You must include the annual turnover of a relevant business entity with your annual turnover when working out your aggregated turnover.
A relevant business entity is a business entity that, at any time during the income year, is:
- connected with you, or
- is your affiliate.
If you have a relevant business entity, repeat step 1 for each relevant business entity to work out their annual turnover. You must use the same method for working out your annual turnover and the annual turnovers of all your relevant businesses entities.
Step 3 - work out your aggregated turnover
To work out your aggregated turnover, add the annual turnovers of relevant business entities to your annual turnover.
When working out your aggregated turnover, do not include income:
- from dealings between you and a relevant business entity
- from dealings between any of your relevant business entities, and
- of an entity when it was not your relevant business entity.
If your aggregated turnover is less than $2 million you are a small business entity for the current year.
If you are not a small business entity in an income year, you may still be able to access the capital gains tax concessions if you pass the $6 million maximum net asset value test.