Home – New Forums Starting your journey Sole Trader with ABN, Tax Question Reply To: Sole Trader with ABN, Tax Question

#1130501
Chris Brodie
Member
  • Total posts: 94
Up
0
::
PaulTheDude, post: 147945 wrote:
Hi and nice to meet you all!

I have had a ABN for a while but never used it yet. I have a full time job (perm) which I pay my taxes etc.

I am thinking of starting up a part-time teaching service in the evenings and weekends mainly.

The question is this, how do I seperate the income form my personal income? What I want to do is the income via the business is seperate to my income. I don’t want the income of the business to be subjected to tax breaks.

If I take income from the company then that portion will be subject to my standard income tax.

I am a sole trader and have not registered a company name as I am trading under my own name.

I need to purchase computer etc, can I deduct this from the income for tax purposes?

Many thanks.

Hi Paul,

Firstly you may need to check your ABN is still registered. You say it has not been used “in a while” and the ATO will sometimes cancel ABN’s if they are not seen to be active.

If you use an ABN registered in your name then you need to declare the income earned less any expenses in your name. If this results in a profit you will pay tax on it at your current marginal rate. Also note that if you make a loss then this loss will not be automatically offset against your employment income, you will need to meet certain conditions before this is allowed.

You mention using a company, however you need to understand that a company is a seperate legal entity that pays tax at 30% on every dollar of profit (as Steve Divert to Mobile has said). Also once the money is in the Company it is not a simple matter of just taking the money out. It needs to be in a legitimate fashion like wages, dividends and maybe as a loan repayment if you are owed money by the company. If you end up owing the company money you could be taxed on this money at your marginal rate of tax.

The purchase of a computer will be deductable so long as you can show you are using it to earn taxable income. Depending on what your employed job is you may be able to claim the expense / depreciation of the computer against both incomes on a proportion basis.

With the income from your partnership you will need to declare 50% of the profit in your name unless there is a partnership agreement that specifys otherwise (again as Steve pointed out).

Take the time to talk to your accountant and work out what the best way to start your new business as mistakes now can be costly down the track. All the best.