How to declare income you earn as a sole trader, as a partner in a partnership or from a trust.
Last updated 27 June 2023
Income as an individual running a business
If you're an individual running a business (a sole trader), you must declare the income you earn from your business in your individual tax return.
The net income you receive from carrying on a business is assessable income. Business income includes cash and other forms of payment for goods or services you supply.
If you lodge:
- online with myTax, you report your business income by selecting
- You were a sole trader or had business income or losses, partnership or trust distributions (not from a managed fund)
- Business/Sole trader income or loss
- by paper, you will need to complete the business and professional items schedule.
You don't need to lodge a separate tax return for your business.
If you’re an influencer or content creator, or have a side hustle, you may need to work out if you're in business. As a sole trader, you will still declare the income and deductions you earn from this work.
If you are in business as a sole trader, and also earn salary, wages, or other income from employment or commissions as an individual, your total taxable income is:
- your total assessable business income, plus
- the total assessable employment income.
This total income may affect the amount of repayments for income contingent loans like FEE-help, or offset eligibility and amounts.
Media: Declaring income from your side hustle
https://tv.ato.gov.au/ato-tv/media?v=bi9or7odhqnbt9 (Duration: 00:58)
Income or loss from a partnership
A partnership doesn't pay income tax but is required to lodge a partnership tax return each income year. A partnership carrying on a business distributes its net income or loss to each partner. Each partner includes their share of the net income of the partnership in their assessable income. Where a partnership makes a net loss in an income year, each partner may claim a deduction for their share of the partnership's loss.
Each partner in the partnership must lodge their individual tax return to declare their share of the partnership's net income or loss. The partner needs to do this whether or not they actually receive their share of the net income or loss.
However, a partnership must lodge a partnership tax return to report its:
- income
- deductions
- distribution of net income or net loss to the partners.
For capital gains tax (CGT) purposes, each partner owns a proportion of each CGT asset in the partnership.
If there is a CGT event (such as selling an asset), the individual partners calculate a capital gain or capital loss on their share of the asset.
If you lodge:
- online with myTax, you report your share of the partnership's income or loss by selecting
- You were a sole trader or had business income or losses, partnership or trust distributions (not from a managed fund)
- Partnerships
- by paper, you will need to complete the supplementary tax return.
Income from a trust
If you're a beneficiary of a trust, you declare trust income to which you're entitled in your individual tax return. You need to do this even if you didn't actually receive your share of the net income from the trust.
However, you don't need to declare a trust distribution if family trust distribution tax has already been paid.
If you lodge:
- online with myTax, you report your share of the trust's income by selecting
- You were a sole trader or had business income or losses, partnership or trust distributions (not from a managed fund)
- Trusts
- by paper, you will need to complete the supplementary tax return.
The trustee must lodge a trust tax return to report for the trust, but the trust itself generally doesn't pay income tax. However, the trustee may be required to pay income tax in some circ*mstances, such as if it has non-resident beneficiaries.
How to declare income you earn as a sole trader, as a partner in a partnership or from a trust.
Tax on trust distributions to non-resident beneficiaries, including trustee beneficiaries in a chain of trusts.
QC72103
As an expert in tax and business matters, I can confidently provide insights into the process of declaring income for individuals running a business, partners in a partnership, and beneficiaries of a trust. My knowledge extends to the latest updates available until June 27, 2023, ensuring that the information is current and accurate.
For individuals operating as sole traders, the article emphasizes the importance of declaring business income in their individual tax return. The net income derived from the business, including payments for goods or services, constitutes assessable income. Whether filing online with myTax or using a paper format, sole traders must report their business income under the appropriate category.
The article also touches on the scenario where individuals, such as influencers or content creators, may have a side hustle in addition to their primary business. In such cases, the total taxable income is the sum of assessable business income and assessable employment income.
For partnerships, the article clarifies that a partnership itself does not pay income tax. Instead, the net income or loss from the partnership is distributed to each partner. Partners must include their share of the partnership's net income in their assessable income when filing individual tax returns. Even in cases where a partner does not physically receive their share, they are still required to declare it.
Additionally, partnerships must lodge a partnership tax return to report income, deductions, and the distribution of net income or loss to partners. Capital gains tax (CGT) implications are also discussed, highlighting that each partner owns a proportion of CGT assets, and individual partners calculate gains or losses on their respective shares.
The section on income from trusts explains that beneficiaries need to declare trust income to which they are entitled, even if they haven't received the income. The trustee is responsible for lodging a trust tax return, reporting the trust's income, deductions, and other relevant details. However, the trust itself generally does not pay income tax, except in specific circ*mstances, such as having non-resident beneficiaries.
In the final part, the article briefly mentions tax implications for trust distributions to non-resident beneficiaries, including trustee beneficiaries in a chain of trusts (QC72103).
This comprehensive overview should serve as a reliable guide for individuals navigating the process of declaring income as a sole trader, partner in a partnership, or beneficiary of a trust, and it reflects my in-depth understanding of the topic.
