• Introduction

    Who this schedule is for

    Attention

    Warning:

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

    End of attention

    If you complete items 13, 14 or 15 of your tax return (supplementary section), you must fill in the Business and professional items schedule 2004-05 and send it in with your tax return. If the business or professional items that apply to you are not filled in, your tax return will be sent back to you. These instructions will help you to fill in the schedule.

    If your tax return and completed schedule are lodged late, you may be liable for a penalty. For information on the penalty for failing to lodge on time, see page 12 in TaxPack 2005.

    If you have a net loss from a business activity carried on in partnership with others, you may need to complete items P3 and P9 of the schedule. See the instructions for item 12 of your tax return (supplementary section). Do not include your partnership details at any other item on your schedule.

    You will also need to complete the Individual PAYG payment summary schedule 2004-05 if you received any of the following:

    These instructions will help you fill in that schedule.

    What's new

    Foreign resident withholding (FRW)

    A new measure has been introduced that extends the pay as you go (PAYG) withholding system to include certain payments made to foreign residents. Only payments described in the income tax regulations are subject to this new withholding measure.

    These payments are currently:

    • payments for promoting or operating casino gaming junkets
    • payments for entertainment and sports activities, and
    • payments under contract for the construction, installation and upgrading of buildings, plant and fixtures and for associated activities.

    The foreign resident withholding measure results in the inclusion of the following labels at item P8 on the Business and professional items schedule for individuals 2005:

    • B Gross payments subject to foreign resident withholding, and
    • U Foreign resident withholding expenses.

    Payers are required to withhold at the rate prescribed in the appropriate regulation. The Tax Office may grant a variation to the rate of withholding in special circumstances.

    Credit for tax withheld under foreign resident withholding should be claimed at item 14 and/or item 12 of the tax return (supplementary section).

    Existing withholding events will continue to apply - for example, a foreign resident employee would continue to have an amount withheld under the existing withholding provisions.

    The existing pay as you go (PAYG) machinery will apply to these new withholding obligations.

    This withholding is not a final tax. These new withholding requirements will not affect existing income tax obligations for foreign residents deriving assessable income in Australia, such as the requirement to lodge a tax return. Any amounts withheld will be available as a credit against the income tax assessment.

    Gross regulated income subject to foreign resident withholding will not be taken into account in determining the PAYG instalment rate.

    For more information about foreign resident withholding visit our website, or phone the Tax Reform Infoline (see More information).

    If you do not speak English and need help from the Tax Office, phone the Translating and Interpreting service (see More information).

    How many hours did it take you to prepare and complete this schedule?

    The Tax Office is committed to reducing the costs involved in complying with your tax obligations. Your response to this item will help us monitor these costs as closely as possible.

    Write the number of hours it took you to prepare and complete your Business and professional items schedule for individuals 2005 at S in the Taxpayer's signature block on your schedule.

    When completing this item consider the time, rounded up to the nearest hour, you spent:

    • reading the instructions
    • collecting the necessary information to complete this schedule
    • making any necessary calculations
    • completing the schedule
    • putting the tax affairs of your business in order so the information can be handed to your tax agent.

    Your answer should reflect the time your business spent preparing and completing your schedule and the time spent by your tax agent and any other person whose assistance you obtained.

    If you are a tax agent preparing this schedule on behalf of your client, include your time and a reliable estimate of their time.

    Records you need to keep

    You must keep records of most transactions in English for five years after you prepared or obtained them, or five years after you completed the transactions or acts to which they relate, whichever is the later. Taxation Ruling TR 96/7 - Record keeping - section 262A - general principles clarifies the record-keeping obligations of small businesses, particularly for cash transactions.

    The Tax Office is helping small business operators meet their record-keeping obligations by reviewing their record-keeping practices. These reviews start with a telephone call or a brief visit to the business premises. The process is explained, you can ask questions and an interview is arranged for a later date.

    Some of the more significant record-keeping problems identified by the Tax Office are failure to:

    • record cash income and expenditure
    • account for personal drawings
    • record goods for your own use
    • separate private expenses from business expenses
    • keep valid tax invoices for creditable acquisitions when registered for GST
    • keep adequate stock records
    • keep adequate records to substantiate motor vehicle claims.

    For additional information, see Record keeping for small business (NAT 3029).

    To find out how to get this publication, or to get a CD-ROM of our electronic record-keeping package e-Record, see More information.

    Hobby or business?

    It is important to determine whether you are carrying on a business or pursuing a hobby, sport or recreational activity that does not produce income.

    In general, you are considered to carry on a business if the activity:

    • has commenced
    • has a significant commercial purpose or character
    • has a purpose of profit as well as a prospect of profit
    • is carried out in a manner that is characteristic of the industry
    • is repeated, regular or continuous
    • cannot be more accurately described as a hobby, recreation or sporting activity.

    For additional information, see Are you carrying on a business? in the publication Tax basics for small business (NAT 1908). Primary producers should also see Taxation Ruling TR 97/11 - Am I carrying on a business of primary production?

    Remember

    When you have completed your Business and professional items schedule 2004-05, you will need to transfer:

    • your Net PSI amount (if any) from A item P1 on your schedule to A item 13 on page 9 of your tax return (supplementary section)
    • your net income or loss from business amounts from Y and Z item P8 on your schedule to B and C (respectively) item 14 on page 10 of your tax return (supplementary section).
    Last modified: 15 Mar 2007QC 27592