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Net small business income

Last updated 19 July 2023

Is the partnership a small business entity?

  • No – Go to item 6.
  • Yes – Read on.

The partnership needs to work out its net small business income. Partners, who are individuals, need to know their share of net small business income so that they can claim the small business income tax offset in their own tax return if eligible.

An individual is only entitled to the offset in respect of a share of net small business income received from a small business entity partnership in which they are a partner, where the business income was derived by that partnership from carrying on its own business activities.

Partners who are prescribed persons (under 18 years of age and not excepted persons) are entitled to the offset on their share provided they are actively carrying on the partnership business.

The net small business income is the partnership’s assessable income from carrying on a small business, less deductions to the extent that they are attributable to that assessable income. If the partnership carries on multiple businesses, then combine all the partnership's assessable income and attributable deductions relating to those businesses to work out the net small business income.

If the partnership made a loss on a business activity, the non-commercial loss rules may affect an individual partner's share of net small business income; see Appendix 7.

To work out net small business income, do not include:

  • any personal services income that was attributed to another person
  • any of the following deductions              
    • tax-related expenses
    • gifts or contributions.

Completing this item

Step 1: Did the partnership have business income or deductions shown at items other than item 5 – label S?

  • No – The amount at item 5 – label S is the partnership's net small business income. Show this amount at item 5 – label V. You have finished this item. Go to item 6.
  • Yes – Go to step 2.

Step 2: If the partnership had any of the following, use Worksheet 1A to work out the net small business income:

  • foreign source business income at item 23
  • attributed foreign business income at item 22
  • interest income earned in the course of carrying on the business shown at item 11
  • dividend income earned in the course of carrying on the business shown at item 12, for example dividends earned in the course of carrying on a share trading business
  • any business income not already shown at this item
  • any business deductions not already shown at this item, for example debt deductions against foreign source business income claimed at item 18.

Show the net small business income at item 5 – label V. Do not show cents.

Continue to: 6. Tax withheld