LAW REPORT
Assessable income and deductions
Ingrid Pagura | BA , LLB
It ’ s tax time again and I thought it would be a suitable time to remind everyone about what is classed as assessable income and what is classed as acceptable deductions . In other words , what do you need to tell the ATO about what income you earnt and what you can claim to reduce the amount of tax you ’ ll need to pay .
Assessable income is most of the income you ’ ll earn within a financial year . You will pay tax on that if you exceed the taxfree threshold of $ 18,200 .
As a business , assessable income includes the following :
• All gross income ( before tax ) made from your usual business activities . This should include all consultations fees from clients , sales of products in your clinic or online and any foreign income you may have earned from online sales as well . It doesn ’ t matter if the client has paid you in cash or by funds transfer , it all needs to be included . If you also work for an employer , you will need to include those wages separately .
• Other business income that isn ’ t part of your usual or everyday business activities including : o Tips or commissions you may have received o Income earned through vouchers , coupons and gift cards o Allowances , such as for clothing and laundry or car allowances o Interest from bank accounts o Dividends and other income from investments o Rent from investment properties , including income from renting a room to another therapist or renting out products o Pensions , including any government payment you received o Government payments that are assessable , such as from a disaster relief fund o Capital gains from investments you sold for a profit o Cash prizes for your business or the value of gifts your business may have received o Business prizes or awards which included a cash payment o Money from insurance claims relating to your business
Another area to be aware of is non-cash and barter transactions . For example , you might have provided a consultation in exchange for work done on your website . According to the ATO , you should include the market value of this service as part of your assessable income .
So , what about crypto assets ? The ATO has thought about those too and states that you must include the Australian dollar value of any crypto assets you received for goods and services you provided . For more information on crypto assets , please see the ATO website .
So , after that lengthy list of things that you do need to include , is there anything you don ’ t need to ? The answer is yes and here they are :
• GST you collected , as that is included elsewhere
• Non-assessable non-exempt government grants
• Earnings from a hobby
• Prizes and awards not associated with your business
• Money you contributed as a business owner
• Money you borrowed
• Gifts and inheritances
Now let ’ s look at deductions you can claim , the idea being that if you include the income , you can also include the cost to you of making that income . The aim is to reduce the amount of tax payable on your assessable income .
102 | vol30 | no2 | JATMS