The sole trader is one of Australia’s four main small business structures (the other three being a partnership, company, and trust) that is relatively easy to set up. Unlike other business structures, a sole trader business owner can lodge a single tax return that serves both business and personal purposes. Before you lodge, understanding the tax return and how taxation will be applied to your income will help you make profitable decisions about your money. This blog discusses all the details you must know before lodging your sole trader tax return.
Before lodging the return, you must keep the following points in mind.
Assessable income is the majority portion of the money you earn to run your business, and it includes income like amounts received from selling products or for offering various services. In the assessable income, the gross earnings must also be included besides the profit.
However, there are several amounts that you must not include in the assessable income. These amounts include GST you have collected, personal funds invested in your business as the owner, and any borrowed amount.
As the owner of your business, you can claim tax deductions against most costs incurred in business operations. Usual business running expenses are costs related to advertising and marketing, electricity, and business travel.
You cannot include other costs in your tax return as deductions are those related to personal use of office equipment, holiday travels, and GST. To make sure you include correct costs as deductions, you may consult a professional sole trader tax accountant.
If the total deductions you have claimed for a financial year are more than the total assessable income, it will result in a tax loss. If you face loss in your sole trader business and earn from other sources like getting a salary, you can claim this loss by offsetting it against the income you earned from any other source. But, for that, you must satisfy the specific ATO criteria. Failing to satisfy this criterion will not allow you to offset this loss, so you must keep this factor in mind.
However, there is an alternative to it. If you can make profits in the following year, the deferred loss can be offset against the profit amount.
Tax Return Perth is known for its exclusive income tax return services to its clients. You may contact them to make sure you receive all the tax deductions and offsets included in the tax return. They offer a free tax return consultation that you can access before the lodgement.