P8 Business income and expenses

Amounts to include

The amounts to be included in the Income and Expenses sections of question P8 are amounts derived from your accounting system or financial statements, except for:

• the values of opening and closing stock, which are to be shown as tax values, and
• depreciation expenses for small business entities choosing to use the simplified depreciation rules, which are to be shown as tax values.

The income and expense amounts to be included at question P8 should form part of your profit and loss statement and are the basis for calculating your net profit or loss. You should deal with any adjustments to these amounts for tax purposes in the reconciliation items section of question P8.

Show PSI and related expenses at question P1 and PSI subject to foreign resident withholding at question P8.

Former STS taxpayers

If you are eligible and are continuing to use the STS accounting method, you must use it to complete the income and expenses sections.

For more information, see Former simplified tax system (STS) taxpayers.

Income

The business income to be shown at question P8 is divided into:

• income from which tax has been withheld because you did not quote your ABN to one of your payers
• gross payments subject to foreign resident withholding (excluding capital gains)
• income that was subject to a PAYG voluntary agreement to withhold tax
• income received under a labour-hire arrangement or from other specified payments
• assessable government industry payments
• other business income.

Crypto assets

Crypto assets are a digital representation of value that you can transfer, store, or trade electronically. This also includes non-fungible tokens. For tax purposes, crypto assets are not a form of money.

The way you use or transact with crypto assets will determine how you treat them for tax purposes.

For more information on the tax treatment of crypto assets used in business, see Crypto assets and business

Sharing economy

Your business income may include amounts earned through the sharing economy or other marketplaces, such as:

• ride-sourcing
• accommodation
• sharing assets like cars, caravans, tools or personal belongings
• providing services or completing tasks through a digital platform.
• Amounts you receive through the sharing economy are assessable income, even if you're not carrying on a business. Include them:
• at question 1 in your tax return if you are an employee, or
• at question 24 in your supplementary tax return if other income.

For more information, see The sharing economy and tax.

Do not show the following types of income at question P8:

• gross interest; show the amount of income at question 10 in your tax return
• dividends and franking credits; show the amounts at question 11 in your tax return
• distributions from partnerships and trusts; show these at question 13 in your supplementary tax return
• gross rental or similar income, including renting out all or part of your home through the sharing economy, that is not derived from carrying on a business of renting property, such as agistment or hire fees; show this amount at question 21 in your supplementary tax return
• income you earned through the sharing economy or other marketplace not derived from carrying on a business; show this amount at question 24 in your supplementary tax return or question 1 in your tax return if you're an employee of the digital platform
• net capital gains; show these at question 18 in your supplementary tax return
• PSI shown at question P1
• farm management repayments; show these at question 17 in your supplementary tax return
• attributed foreign income; show it at question 19 in your supplementary tax return
• foreign source income; show it at question 20 in your supplementary tax return.

Goods and services tax (GST)

If you are registered or required to be registered for GST, the following apply:

• Consider your assessable income, exempt income and amounts received or receivable. For tax purposes you should exclude GST from them when you calculate your income and deductions.
• Reduce deductible losses and outgoings by the amount of input tax credit entitlement. In certain circumstances you could make an adjustment for GST purposes. This could alter your assessable income or deductibles. For example, a change in how much you use an asset for business purposes could increase or decrease your GST component.
• Exclude GST under rules such as capital gains tax and capital allowances.

If you are not registered for GST, or not required to be registered for GST, you do not need to adjust your income and deductions for GST. You can claim the GST-inclusive amount incurred on deductible outgoings.

What you may need

• Primary production worksheet: If you are a primary producer, you will need this worksheet to help you determine some of the amounts in this section. Complete the worksheet before proceeding.
• Individual PAYG payment summary schedule 2023

Did you have amounts withheld from your business income – other than PSI included at question P1?

No	Go to Assessable government industry payments.
Yes	Read on.

If tax has been withheld from business income, you should have received a payment summary or an income statement.

You need to complete Individual PAYG payment summary schedule 2023 before completing question P8 if you received any of the following payment summaries:

• PAYG payment summary – business and personal services income
• PAYG payment summary – withholding where ABN not quoted
• PAYG payment summary – foreign employment.

The PAYG payment summary – business and personal services income allows reporting of different payment types (including voluntary agreement, labour hire or other specified payments). When completing the individual payment summary schedule, you must specify the nature of the income and the payment type made to you.

For more information, see How to complete the Individual PAYG payment summary schedule 2023.

A payer may issue a receipt, remittance or similar document in place of the PAYG payment summary – withholding where ABN not quoted containing the same information as a payment summary.

If you received income from which tax was withheld and you did not receive or have lost your payment summary, contact your payer and ask for a copy.

How to complete the Individual PAYG payment summary schedule 2023

Remember: If you have both business income (question P8) and PSI (question P1), you must complete an Individual PAYG payment summary schedule 2023 for each type of income.

Step 1 Print your TFN and name in the appropriate boxes at the top of the schedule.

Step 2 Nature of income, print X in the Business income box.

Step 3 For each payment summary, transfer the following information to the schedule:

• the type of withholding; look at your payment summary carefully to determine its type and complete the Type box, using the following key
  • V voluntary agreement
  • S labour hire or other specified payments
  • N withholding where ABN not quoted
  • F foreign resident withholding
   
• the payer’s ABN or withholding payer number (WPN) and the payer’s name in the appropriate boxes
• the total tax withheld in the Tax withheld box
• the gross payment in the Gross payment box.

Step 4 Check that you have recorded details from all relevant payment summaries on your payment summary schedule.

You must keep your payment summaries for a period of 5 years.

Payers must report to us details of payments where amounts of tax have been withheld. This information will be cross-checked with your tax return to make sure that you have declared the correct amount of income and the correct amount of tax withheld.

Gross payments where Australian business number (ABN) not quoted

Did you have amounts of tax withheld for failure to quote an ABN?

No	Go to Gross payments subject to foreign resident withholding (excluding capital gains).
Yes	Read on.

You need to know

The amounts you show at labels C and D are the total income you received, from which your payers have withheld tax because you did not quote your ABN. You will be able to calculate these amounts from your completed Individual PAYG payment summary schedule 2023.

Completing this question

Step 1 Add up all the Gross payment amounts on your completed payment summary schedule, derived from primary production activities that have an N in the Type box. Enter the total at question P8 – label C on your schedule. Do not show cents.

Step 2 Add up all the Gross payment amounts on your completed payment summary schedule, derived from non-primary production activities that have an N in the Type box. Show the total at label D. Do not show cents.

Step 3 Add up the amounts you have written at labels C and D and enter the total in the adjacent Totals box.

If you complete question P8 – labels C and D, you must complete question 15 – label W in your supplementary tax return.

Gross payments subject to foreign resident withholding (excluding capital gains)

Did you receive any payments that were subject to foreign resident withholding (excluding capital gains)?

No	Go to Gross payments – voluntary agreement.
Yes	Read on.

You need to know

The amount you show at label B is the total income you received from your payers which is subject to foreign resident withholding. It includes any amounts of tax withheld. You calculate this amount from your completed Individual PAYG payment summary schedule 2023.

Do not include amounts subject to foreign resident capital gains withholding. Include these amounts at question 18 Capital gains in your supplementary tax return.

Completing this question

Step 1 Add up all the Gross payment amounts on your completed payment summary schedule derived from non-primary production activities that have an F in the Type box. Show the total at question P8 – label B. Do not show cents.

Step 2 Transfer the amount at label B to the adjacent Totals box.

If you complete question P8 – label B, you must complete question 15 – label E on page 14 of your supplementary tax return.

Gross payments – voluntary agreement

Did you receive any income that was subject to a PAYG voluntary agreement?

No	Go to Gross payments – labour hire or other specified payments.
Yes	Read on.

You need to know

The amounts you show at labels E and F are the total income you received that was subject to a voluntary agreement to withhold tax and include the tax withheld. You will be able to calculate this amount from your completed Individual PAYG payment summary schedule 2023.

Completing this question

Step 1 Add up all the Gross payment amounts on your completed payment summary schedule derived from primary production activities that have a V in the Type box. Show the total at question P8 – label E in your schedule. Do not show cents.

Step 2 Add up all the Gross payment amounts on your completed payment summary schedule derived from non-primary production activities that have a V in the Type box. Show the total at label F. Do not show cents.

Step 3 Add up the amounts you show at labels E and F, and show the total in the adjacent Totals box.

If you completed question P8 – label E or F, you must complete question 15 – label D in your supplementary tax return.

Gross payments – labour hire or other specified payments

Did you receive:

• income under a labour-hire arrangement, or
• a specified payment, including
  • income from tutorial services you provided for the Indigenous Student Success Programme (formerly known as the Indigenous Tutorial Assistance Scheme) of the Department of the Prime Minister and Cabinet
  • income from translation and interpretation services for the Translating and Interpreting Service National of the Department of Home Affairs, or
  • income as a performing artist in a promotional activity?
   

No	Go to Assessable government industry payments.
Yes	Read on.

You need to know

The amount you show at label O is the total income you received from labour hire or specified payments and includes the tax that was withheld. You can calculate this amount from your completed Individual PAYG payment summary schedule 2023.

Do not include income you received as an employee of a labour-hire business. That income appears on your income statement or PAYG payment summary – individual non-business. Show it at question 1 in your tax return.

Completing this question

Step 1 Add up all the Gross payment amounts on your completed payment summary schedule that have an S in the Type box. These amounts are non-primary production income. Show the total at question P8 – label O. Do not show cents.

Step 2 Transfer the amount at label O to the adjacent Totals box.

If you complete question P8 – label O, you must complete question 15 – label F on page 14 of your supplementary tax return.

It is expected you will not have any primary production amounts at this question. Leave label N blank.

Assessable government industry payments

Did you receive assessable government industry assistance?

No	Go to Other business income.
Yes	Read on.

You need to know

Generally, government credits, grants, rebates, bounties and subsidies are assessable income of the recipient if they are received in, or in relation to, the carrying on of a business. This includes amounts of a capital nature. Amounts relating to the commencement or cessation of a business may give rise to a capital gain. However, in certain circumstances, a specific grant or payment is considered to be exempt income or non-assessable non-exempt income.

A number of Commonwealth, State and Territory government grants and payments have been made available to businesses in response to certain natural disasters and COVID-19. Only those grants and payments that are assessable income will need to be included at this question.

Do not include at this question the following grants and payments:

• Cash Flow Boost Payments (COVID-19) (non -assessable, non-exempt income). If cash flow boost payments have been included as income in the accounts, include them at Other business income and Income reconciliation adjustments at this question.
• Commonwealth and State government grants and payments that are tax free.

For more information, see Government grants, payments and stimulus during COVID-19.

Examples of assessable government industry assistance are:

• bounties
• employee subsidies
• export incentive grants
• fuel tax credits
• industry restructuring and adjustment payments
• JobMaker hiring credits
• JobKeeper payments (COVID-19)
• Apprentices and Trainees wage subsidy
• producer rebate (wine equalisation tax)
• excise refund scheme for alcohol manufacturers
• product stewardship for oil program benefit.

JobMaker hiring credit reporting

The accounting basis you use determines the way you report JobMaker hiring credit payments.

Accruals accounting basis

JobMaker hiring credit payments are derived when the entity provides the ATO with a valid claim form after each JobMaker period.

JobMaker hiring credit payments relating to valid claim forms made in 2022–23 are assessable in 2022–23. You include them in your 2022–23 tax return.

Cash accounting basis

JobMaker hiring credit payments are derived when you receive those payments. Payments received during 2022–23 are assessable in 2022–23.

For more information, see:

• TR 2006/3 Income tax: government payments to industry to assist entities (including individuals) to continue, commence or cease business
• Government grants, payments and stimulus during COVID-19 – tax implications

Do not show ‘Medicare payments received by medical practices’ at this question. Show them at Other business income.

Completing this question

Step 1 Show your total primary production government industry payments received by each business at question P8 – label G on page 2 of your schedule. Do not show cents.

If you have completed the Gross income from primary production worksheet in Information for primary producers 2023, include at label G the amount at PP11 on the worksheet.

Step 2 If your assessable primary production government industry payments include fuel tax credits, producer rebate (wine equalisation tax), excise refund scheme for manufacturers or product stewardship for oil program benefit, print D in the Type box at the right of the amount at label G.

Step 3 Show your total non-primary production government industry payments received by each business at label H. Do not show cents.

Step 4 If your assessable non-primary production government industry payments include fuel tax credits producer rebate (wine equalisation tax), excise refund scheme for alcohol manufacturers or product stewardship for oil program benefit, print D in the Type box at the right of the amount at label H.

Step 5 Add up the amounts you have written at labels G and H, and show the total in the adjacent Totals box.

Other business income

Did you receive any other business income?

No	Go to Total business income.
Yes	Read on.

You need to know

Other business income includes:

• gross sales of trading stock
• gross sales from produce
• goods taken from stock for your own use
• value of livestock killed for rations
• value of livestock exchanged for other goods or services
• gross earnings from services
• rent derived from carrying on a business of renting property
• income earned through the sharing economy, or other marketplace, where you're carrying on a business
• taxi driver and ride-sourcing earnings (income you earned as a non-employee taxi driver if it is not shown at question P1)
• amounts received as recoupment of expenses
• bad debts recovered
• profit on sale of depreciating assets
• royalties
• insurance recoveries
• subsidies
• employee contributions for fringe benefits
• assessable non-government assistance from all sources
• foreign exchange (forex) gains.

Your ‘other business income’ excludes amounts shown at labels C, D, B, E, F, N, O, G and H in your schedule.

If you are a primary producer, you must add the amounts shown at PP1, PP2, PP6, PP7 and PP10 on your Gross income from primary production worksheet. This worksheet is included in Information for primary producers 2023. You must add the total to any other income from a business of primary production referred to above. You show the total of all other income from the business of primary production at question P8 – label I on page 2 of your schedule.

Completing this question

Step 1 Show your total amount of ‘other’ primary production business income or loss at question P8 – label I on page 2 of your schedule. Do not show cents.

Step 2 If you made a loss, print L in the box at the right of the amount at label I.

Step 3 Show your total amount of ‘other’ non-primary production business income or loss at label J. Do not show cents.

Step 4 If you made a loss, print L in the box at the right of the amount at label J.

Step 5 Add up your ‘other’ primary production and non-primary production business income or loss and show the total in the adjacent Totals box.

Step 6 If you made a loss, print L in the box at the right of the Totals box.

Total business income

Completing this question

Step 1 Add up the primary production amounts shown at question P8 – labels C, E, G and I in your schedule. Show the total at TOTAL BUSINESS INCOME in the Primary production column.

Step 2 If you made a loss, print L in the box at the right of the amount at TOTAL BUSINESS INCOME in the Primary production column.

Step 3 Add up the non-primary production amounts shown at question P8 – labels D, B, F, O, H and J. Show the total at TOTAL BUSINESS INCOME in the Non-primary production column.

Step 4 If you made a loss, print L in the box at the right of the amount at TOTAL BUSINESS INCOME in the Non-primary production column.

Step 5 Add up the amounts at TOTAL BUSINESS INCOME in the Primary production and Non-primary production columns and show the total in the adjacent Totals box. If you made a loss, print L in the box at the right of this amount.

Expenses

Do not include the following expenses on your schedule:

• non-business interest and dividend income expenses; claim deductible expenses at questions D7 and D8 in your tax return
• farm management deposits; include them at question 17 in your supplementary tax return
• non-business rental expenses; claim deductible expenses at question 21 in your supplementary tax return
• expenses and losses relating to foreign source income; take them into account as required at question 20 or, in the case of certain debt deductions, claim them at question D15 in your supplementary tax return
• expenses relating to your personal services income shown at question P1 in your schedule
• low-value pool deduction, where the pool contains assets used for work-related, self-education or non-business rental purposes; see question D6 in Individual tax return instructions 2023.

Your expenses may include expenditure relating to the acquisition and disposal of crypto assets in the ordinary course of your business, or the arm's length value of the business item (including trading stock) acquired using crypto assets.

You need to complete all questions that relate to your business or businesses.

You cannot deduct salary and wage expenses where you have not complied with your pay as you go withholding obligations. See Removing tax deductibility of non-compliant payments.

If you are a primary producer, you will need a primary production worksheet to help you work out some of the amounts in this section. This worksheet is included in Information for primary producers 2023. Complete the worksheet before proceeding.

Goods and services tax

If you are registered or required to be registered for GST, exclude from the deductions any input tax credit entitlements that arise in relation to outgoings.

If you pay GST by instalments, and incurred a penalty for underestimating a varied GST instalment, you can claim a deduction for the penalty at question D10 in your tax return. Do not show the penalty on your Business and professional items for individuals 2023.

For more information, see Individual tax return instructions 2023.

Records you need to keep

You must keep your business expenses records for 5 years after you prepared or obtained them, or 5 years after you completed the transactions or acts to which they relate.

Prepayments of $1,000 or more

If you made a prepayment of $1,000 or more for something to be done (in whole or in part) after 30 June 2022, the timing of your deduction may be affected by the rules relating to prepayments. You will need to apportion your deduction for prepaid business expenditure over the service period, or 10 years, whichever is less. There is an exception if the 12-month rule applies and you are a small business entity, or you would be a small business entity if the aggregated turnover threshold was less than $50 million.

Where expenses shown at question P8 include prepaid expenses that differ from the amounts allowable as deductions in 2022–23, make an expense reconciliation adjustment at question P8 – label H in the Reconciliation items section.

For more information, see Deductions for prepaid expenses 2023

Thin capitalisation

The thin capitalisation provisions apply to entities (including individuals) to reduce certain deductions (called ‘debt deductions’) for costs incurred in obtaining and servicing debt finance, where the debt applicable to Australian operations exceeds the limits set out in Division 820 of the ITAA 1997.

The thin capitalisation rules may apply to you if:

• you are an Australian resident and you, or any of your associate entities, are an Australian controller of a foreign entity or carry on business overseas at or through a permanent establishment, or
• you are a foreign resident with operations or investments in Australia and you are claiming debt deductions.
• The thin capitalisation rules will not affect you if:
• your debt deductions (combined with the debt deductions of your associate entities) do not exceed $2,000,000 in 2022–23, or
• you are an Australian resident and the combined value of your associates’ and your Australian assets is not less than 90% of the value of your associates’ and your total assets.

If the thin capitalisation rules affect you, the amount of any debt deductions you can claim may be reduced by these rules.

Opening stock

Did you have trading stock on hand at the start of the year?

No	Go to Purchases and other costs.
Yes	Read on.

You need to know

The opening value of an item of stock must equal its closing value in the previous year. The total value of all stock on hand at the start of the year is equal to the amount shown as closing stock on your 2022 schedule.

If you are a primary producer, you must add the value of your opening stock from your livestock account at PP4 on your primary production worksheet to the value of your opening stock from your produce account at PP9 on your primary production worksheet. The total of these amounts is the total value of your primary production opening stock.

Do not include any amounts representing opening stock of a business which commenced operations during the year. Include the purchase costs of these items in the relevant Purchases and other costs box.

Completing this question

Step 1 Show the total value of your primary production opening stock at Opening stock in the Primary production column, question P8 on your schedule. Do not show cents.

Step 2 Show the total value of your non-primary production opening stock at Opening stock in the Non-primary production column, question P8. Do not show cents.

Step 3 Add up your primary production and non-primary production opening stock values and show the total at label K.

Purchases and other costs

Did you have purchases and other costs?

No	Go to Closing stock.
Yes	Read on.

You need to know

Purchases and other costs represent the direct cost of materials used for manufacture, sale or exchange in deriving the gross proceeds or earnings of the business. It includes inwards freight and the cost of stock acquired when starting or acquiring a business during the year. It may also include some costs for labour and services provided under contract, if these are recorded in the cost of sales account in your business books of account. If so, do not include this amount as Contractor, sub-contractor and commission expenses.

If you are a primary producer, you must include the value of your purchases from your livestock account at PP5 on your primary production worksheet.

Completing this question

Step 1 Work out the value of your primary production purchases and other costs directly related to trading stock. If you have more than one business, add up all your primary production purchases and costs.

Step 2 Show the total value of your primary production purchases and other costs directly related to trading stock at Purchases and other costs in the Primary production column, question P8 in your schedule. Do not show cents.

Step 3 Work out the value of your non-primary production purchases and other costs directly related to trading stock. If you have more than one business add up all your non-primary production purchases and other costs.

Step 4 Show the total value of your non-primary production purchases and other costs directly related to trading stock at Purchases and other costs in the Non-primary production column, question P8. Do not show cents.

Step 5 Add up your primary production and non-primary production purchases and other costs directly related to trading stock, and show the total at label L.

Former STS taxpayers

If you are eligible and are continuing to use the STS accounting method, show at label L only purchases and other costs that you have paid.

For more information, see Former simplified tax system (STS) taxpayers.

Closing stock

Did you have trading stock on hand at the end of the year?

No	Go to Cost of sales.
Yes	Read on.

Are you a small business entity choosing to use the simplified trading stock rules?

No	Go to Other businesses.
Yes	Read on.

Small business entities

You need to know

You need to account for changes in the value of your trading stock only if there is a difference of more than $5,000 between the value of all your stock on hand at the start of the income year and a reasonable estimate of the value of all your stock on hand at the end of the income year.

The value of your stock on hand at the start of the income year is the same value as the closing value shown in your schedule in the previous year. This may not necessarily reflect the actual value of your stock if you did not account for the change in value of your stock in the previous year. For more information on a reasonable estimate of the value of stock, read Simplified trading stock rules.

You can still choose to conduct a stocktake and account for changes in the value of trading stock, if you wish.

Is the difference between the value of your opening stock and a reasonable estimate of your closing stock more than $5,000?

Yes	You must account for changes in the value of your trading stock. Go to step 2.
No	If you choose not to account for changes in the value of your trading stock, go to step 1. Otherwise, go to step 2.

Completing this question

Step 1 If the difference referred to above is $5,000 or less and you choose not to account for this difference, the closing stock values you put in both the Primary production and Non-primary production columns at question P8 in your schedule must be the same as the values you put at Opening stock. Do not put your reasonable estimate.

Add up your primary production and non-primary production closing stock values, and enter the total at label M.

Enter in the Type box at the right of label M the code letter you used last year to value closing stock:

• C cost
• M market selling value
• R replacement value.

If this is your first year in business, the value of your closing stock will be zero. Print C in the Type box.

Go to Cost of sales.

Step 2 If the difference referred to above is more than $5,000 or you choose to account for the difference in trading stock, the closing stock values must be brought to account under section 70-35 of the ITAA 1997. See Other businesses for how to complete this question.

You must include in your closing stock value at question P8 – label M the value of all stock on hand, regardless of whether you have paid for the stock.

Other businesses

You need to know

The amount you show at Closing stock is the total of the value of all items of trading stock, with the value of each item calculated for tax purposes in accordance with section 70-45 of the ITAA 1997.

Trading stock is anything you have on hand which you produced, manufactured, acquired or purchased for the purpose of sale, manufacture or exchange. For example, trading stock includes livestock but not working animals (except those used by a primary producer), crops and timber when harvested, and wool after it is removed from the sheep.

Manufacturers must include as trading stock partly manufactured goods and materials on hand. However, closing stock excludes any amount that represented closing stock of a business that ceased operations during the year. This amount is included in Other business income at question P8 – labels I or J.

For more details about what constitutes trading stock, read Simplified trading stock rules.

You can choose one of the following 3 methods to value your trading stock:

• cost
• market selling value
• replacement value.

You may elect to value an item of trading stock below the lowest value calculated by any of these methods. This may be because it has become obsolete or there are other special circumstances. The value you elect must be reasonable. Where you elect to value an item of trading stock below cost, market selling value and replacement value, you must complete question P19 in your schedule.

You may use different methods to calculate each item of trading stock in different years or for different items in the same year. However, the opening value of each item in a particular year must be the same as the closing value for that item in the previous year.

If you are registered for GST, the value of closing stock should not include an amount equal to the input tax credit that would arise if you had acquired the item solely for business purposes at the end of the income year. Input tax credits do not arise for some items of trading stock, such as shares.

If you are a primary producer, you must add the value of your closing stock from your livestock account at PP3 on your primary production worksheet to the value of your closing stock from your produce account at PP8 on your primary production worksheet.

The total of these amounts is the total value of your primary production closing stock.

As the tax values of closing stock on hand are shown at PP3 and at PP8 on your primary production worksheet, you cannot reduce these values by accounting entries. Keep records showing how each item was valued.

Completing this question

Step 1 Work out the value of your primary production closing stock. If you have more than one business, add up all your primary production closing stock values.

Step 2 Show the total value of your primary production closing stock at Closing stock in the Primary production column, question P8 in your schedule. Do not show cents.

Step 3 Work out the value of your non-primary production closing stock. If you have more than one business, add up all your non-primary production closing stock values.

Step 4 Show the total value of your non-primary production closing stock at Closing stock in the Non-primary production column. Do not show cents.

Step 5 Add up your primary production and non-primary production closing stock values and enter the total at label M.

Step 6 From the list below, choose the letter that matches the method you used to value closing stock. If more than one method was used, select the letter that applies to the largest value:

• C cost
• M market selling value
• R replacement value.

Step 7 Print the letter from step 6 in the Type box at the right of the amount at label M.

Cost of sales

Did you have any cost of sales?

No	Go to Foreign resident withholding expenses.
Yes	Read on.

You need to know

Goods taken for your own use should not be accounted for as stock on hand at 30 June 2023. Include at question P8 – labels I and J in your schedule the value of:

• livestock killed for rations
• livestock exchanged for other goods or services
• goods taken for your own use.

Use worksheet 1 to work out your cost of sales.

Worksheet 1 – Cost of sales

Row	Calculation elements	Primary production	Non-primary production
a	Stock at 1 July 2022	$	$
b	Purchases at cost	$	$
c	Freight inwards	$	$
d	Other, for example, labour and services	$	$
e	Add the amounts at rows a, b, c and d.	$	$
f	Stock at 30 June 2023	$	$
-	Your cost of sales: Take away the amount at row f from the amount at row e.	$	$

For more information on stock on hand at 1 July 2022, see Opening stock. For more information on stock on hand at 30 June 2023, see Closing stock.

Completing this question

Step 1 Show your total primary production cost of sales at Cost of sales in the Primary production column, question P8 in your schedule. Do not show cents.

Step 2 If the cost of sales in the Primary production column, after taking away row f from row e, is a negative amount, print L in the box at the right of this amount.

Step 3 Show your total non-primary production cost of sales at Cost of sales in the Non-primary production column. Do not show cents.

Step 4 If the cost of sales in the Non-primary production column, after taking away row f from row e, is a negative amount, print L in the box at the right of this amount.

Step 5 Add up your primary production and non-primary production cost of sales and show the total at Cost of sales in the Totals column.

Step 6 If your total cost of sales is a negative amount, print L in the box at the right of this amount.

Foreign resident withholding expenses (excluding capital gains)

Did you have any expenses directly relating to income subject to foreign resident withholding (excluding capital gains)?

No	Go to Contractor, sub-contractor and commission expenses.
Yes	Read on.

Completing this question

Step 1 Show your total non-primary production foreign resident withholding expenses at Foreign resident withholding expenses (excluding capital gains) in the Non-primary production column, question P8 in your schedule. Do not show cents.

Step 2 Transfer the amount you wrote at step 1 to the adjacent Totals box at label U.

You will not have any primary production expense amounts at this question.

Contractor, sub-contractor and commission expenses

Did you have any contractor, sub-contractor or commission expenses in your business?

No	Go to Superannuation expenses.
Yes	Read on.

You need to know

These are expenses for labour and services provided under contract, other than salaries or wages, for example:

• payments to self-employed people, such as consultants and contractors, including payments subject to a PAYG voluntary agreement to withhold, and payments made under a labour-hire arrangement
• commissions paid to people not receiving a retainer
• agency fees (such as for services provided by an advertising agency)
• service fees (such as plant service)
• management fees
• consultant fees.

Do not include the following at this question:

• expenses for external labour which have been included in the business cost of sales account
• expenses for accounting or legal services; include these at All other expenses
• expenses for payments made where the associated withholding obligations have not been complied with. See Removing tax deductibility of non-compliant payments.

Completing this question

Step 1 Show your total primary production contractor, sub-contractor and commission expenses at Contractor, sub-contractor and commission expenses in the Primary production column, question P8 in your schedule. Do not show cents.

Step 2 Show your total non-primary production contractor, sub-contractor and commission expenses at Contractor, sub-contractor and commission expenses in the Non-primary production column. Do not show cents.

Step 3 Add up your primary production and non-primary production contractor, sub-contractor and commission expenses and show the total at label F.

Superannuation expenses

Did you make any superannuation contributions on behalf of eligible employees or their dependants as a business expense?

No	Go to Bad debts.
Yes	Read on.

You need to know

Show superannuation expenses for the income year. Do not include any amount that was a contribution for yourself. The deduction for your own superannuation contributions must be claimed at question D12 in your supplementary tax return. See question D12 in Individual tax return instructions supplement 2023.

Employers are entitled to a deduction for the contributions they made to a complying superannuation, provident, benefit or retirement fund or retirement savings account (RSA) where the contributions are to provide superannuation benefits for employees or to provide benefits to the employee’s dependants on the employee’s death. A deduction is allowable in the income year in which the contributions are made.

Contributions made to a non-complying fund:

• are not allowable as a deduction, and
• do not count towards superannuation guarantee obligations.

You can check the compliance status of superannuation funds at superfundlookup.gov.auExternal Link Under the superannuation guarantee, an employer needs to provide a minimum level of superannuation for employees. If the employer does not make the minimum contribution by the relevant date, the employer is required to pay the superannuation guarantee charge on the superannuation guarantee shortfall. The superannuation guarantee charge is not a superannuation contribution and is not tax deductible. Contributions made by employers to offset a superannuation guarantee charge liability are not deductible.

Contributions paid by an employer to a non-complying superannuation fund on behalf of an employee are fringe benefits (other than where the contributions are made for a temporary resident) and may be subject to tax under the Fringe Benefits Tax Assessment Act 1986.

There is no age-related limit on deductions for contributions made on or before the 28th day following the end of the month in which the employee turns 75. However, the employee may be liable to pay additional tax if their concessional contributions exceed their concessional contributions cap.

For more information, see Super contributions – too much can mean extra tax.

For contributions made after the 28th day following the end of the month of the employee’s 75th birthday, the deduction claimable is limited to:

• the amount of the contribution required under an industrial award, determination or notional agreement preserving state awards, or
• the amount of the contribution that reduces an employer's charge percentage under the Superannuation Guarantee (Administration) Act 1992 in respect of the employee, or
• where both amounts are applicable, apply the greater of the 2 amounts.

Completing this question

Step 1 Show your total primary production superannuation contributions at Superannuation expenses in the Primary production column, question P8 in your schedule. Do not show cents.

Step 2 Show your total non-primary production superannuation contributions at Superannuation expenses in the Non-primary production column. Do not show cents.

Step 3 Add up your primary production and non-primary production superannuation contributions and show the total at label G.

Bad debts

Did you write off any bad debts in your business?

No	Go to Lease expenses.
Yes	Read on.

You need to know

Include income from the recovery of bad debts in Other business income at question P8 – labels I or J.

You are not allowed a deduction for bad debts unless you have previously included the amount in your assessable income and it relates to money you lent in the ordinary course of a money-lending business or it represents a business loss or outgoing of a revenue nature.

Before you can claim a bad debt, it must be bad and not merely doubtful. The question of whether a debt is a bad debt will depend on the facts in each case and, where applicable, the action taken for recovery.

Do not include accounting provisions for doubtful debts at label I. You show them in the Expenses section at All other expenses, then add them back at label H Expense reconciliation adjustments in the Reconciliation items section.

For more information, see TR 92/18 Income tax: bad debts.

You can also claim a deduction for:

• partial debt write-offs; where only part of a debt is bad and is written off, you may claim a deduction for the amount written off
• losses incurred for debt written off under a debt-for-equity swap where you discharge, release or otherwise extinguish the whole or part of a debt owed to you in return for equity in the debtor.

In the case of a debt-for-equity swap, you can claim a deduction for the difference between the amount of the debt and the greater of the market value of the equity at the time of issue or the value of the equity recorded in your books at the time of issue.

Records you need to keep

Keep a statement for all debtors whose bad debts you wrote off during 2022–23, showing:

• their name and address
• the amount of the debt
• the reason you regarded the debt as bad
• where applicable, the year in which you included the amount as income.

Completing this question

Step 1 Show your total primary production bad debts at Bad debts in the Primary production column, question P8 in your schedule. Do not show cents.

Step 2 Show your total non-primary production bad debts at Bad debts in the Non-primary production column. Do not show cents.

Step 3 Add up your primary production and non-primary production bad debts and show the total at label I.

Lease expenses

Did you have lease expenses in your business?

No	Go to Rent expenses.
Yes	Read on.

You need to know

This is expenditure incurred on financial leases and on operating leases for assets such as motor vehicles and plant. Do not include the cost of leasing real estate (show this cost at label K Rent expenses).

If you include capital expenditure incurred to terminate a lease or licence you will need to add back the amount at label H Expense reconciliation adjustments. Although capital expenditure to terminate a lease or licence is not deductible in one year, a 5-year straight-line write-off may be allowable (see section 25–110 of the ITAA 1997) for certain capital expenditure incurred to terminate a lease or licence if the expenditure is incurred in the course of carrying on a business, or in connection with ceasing to carry on a business, see worksheet 4 and note 3.

In some circumstances, lease expenses may be debt deductions for the purposes of the thin capitalisation rules.

If you include an amount of lease expense which is not allowable as a deduction, such as amounts disallowed under the thin capitalisation rules, you will need to add back the amount at label H Expense reconciliation adjustments in the Reconciliation items section in your schedule.

Expenses incurred under a hire purchase agreement are not lease expenses. Such expenses are dealt with at label H Expense reconciliation adjustments in the Reconciliation items section in your schedule.

Special rules apply to leased cars if the cost of the car exceeds the car limit that applies for the financial year in which the lease commences. The car limit for 2022–23 is $64,741.

If you lease a car that is subject to the special rules, the reconciliation between the lease expense and the tax treatment is carried out at label H Expense reconciliation adjustments in the Reconciliation items section.

For more information, see Luxury car leasing.

Records you need to keep

List the assets leased and keep full details of the leasing expenses for each item, including motor vehicles and details of any private use. Leasing expenses of certain cars fall under the substantiation rules.

Completing this question

Step 1 Show your total primary production lease expenses at Lease expenses in the Primary production column, question P8 in your schedule. Do not show cents.

Step 2 Show your total non-primary production lease expenses at Lease expenses in the Non-primary production column. Do not show cents.

Step 3 Add up your primary production and non-primary production lease expenses and show the total at label J.

Rent expenses

Did you have rent as a business expense?

No	Go to Interest expenses within Australia.
Yes	Read on.

You need to know

This is expenditure you incurred as a tenant for rental of land and buildings used in the production of income. Include the cost of leasing real estate.

Completing this question

Step 1 Show your total primary production rent expenses at Rent expenses in the Primary production column, question P8 in your schedule. Do not show cents.

Step 2 Show your total non-primary production rent expenses at Rent expenses in the Non-primary production column. Do not show cents.

Step 3 Add up your primary production and non-primary production rent expenses and show the total at label K.

Interest expenses within Australia

Did you incur interest as a business expense on money borrowed within Australia?

No	Go to Interest expenses overseas.
Yes	Read on.

You need to know

Include interest you incurred on money borrowed within Australia to acquire income-producing assets used in your business, to finance business operations or to meet current business expenses.

Do not include interest incurred in deriving rental income. Claim this at question 21 in your supplementary tax return.

If you include an amount of interest which is not allowable as a deduction, such as amounts denied by the thin capitalisation rules, you will need to add back the amount at label H Expense reconciliation adjustments in the Reconciliation items section in your schedule.

Completing this question

Step 1 Show your total primary production interest expenses within Australia at Interest expenses within Australia in the Primary production column, question P8 in your schedule. Do not show cents.

Step 2 Show your total non-primary production interest expenses within Australia at Interest expenses within Australia in the Non-primary production column, question P8 in your schedule. Do not show cents.

Step 3 Add up your primary production and non-primary production interest expenses within Australia and show the total at label Q.

Interest expenses overseas

Did you incur interest as a business expense on money borrowed overseas?

No	Go to Depreciation expenses.
Yes	Read on.

You need to know

Include any interest incurred on money borrowed from overseas sources to acquire income-producing assets used in your business:

• to finance business operations, or
• to meet current business expenses.

Do not include interest incurred in deriving rental income. Claim this at question 21 in your supplementary tax return.

Generally, you are required to withhold an amount of withholding tax:

• from interest paid or payable to non-residents, and
• from interest derived by a resident through an overseas branch.

You must send these withheld amounts to us. You cannot deduct an interest expense if you were required to withhold tax on that interest and you failed to do so.

If you paid or credited any interest or amounts in the nature of interest:

• to a non-resident of Australia, or
• to a resident’s overseas branch

you need to provide additional information. On a separate piece of paper:

• print the title Schedule of additional information – question 15
• print your name, address and TFN
• print the name and address of each recipient
• print the total amounts paid or credited
  • to each non-resident, and
  • to the overseas branch of each resident
   
• print the amount of tax withheld, if no tax was withheld, state the reason.

Then:

• print X in the Yes box at Taxpayer’s declaration
• attach the schedule to page 3 of your tax return.

For more information on the tax treatment of interest paid to non-residents, contact us.

If you include an amount of interest which is not allowable as a deduction, such as amounts denied by the thin capitalisation rules, you will need to add back the amount at label H Expense reconciliation adjustments in the Reconciliation items section in your schedule.

Completing this question

Step 1 Show your total primary production overseas interest expenses at Interest expenses overseas in the Primary production column, question P8 in your schedule. Do not show cents.

Step 2 Show your total non-primary production overseas interest expenses at Interest expenses overseas in the Non-primary production column. Do not show cents.

Step 3 Add up your primary production and non-primary production overseas interest expenses and show the total at label R.

Depreciation expenses

Did you have depreciation as a business expense?

No	Go to Motor vehicle expenses.
Yes	If you are a small business entity and are choosing to use the simplified depreciation rules, read on. Otherwise, go to Other businesses.

Continuing small business pools

If you are not carrying on a business in 2022–23, but in a prior year you allocated assets to a general small business pool or long-life small business pool (or the law allocated the assets to such a pool), do not include the pool deductions at this question. Show such deductions at question D15 in your supplementary tax return.

Small business entities

You need to know

You show at question P8 – label M Depreciation expenses the total depreciation deductions being claimed under the small business entity simplified depreciation rules and for the business use of other assets under the uniform capital allowances (UCA) rules. This includes your deduction under the small business entity rules for depreciating assets used for work-related or self-education purposes. However, this excludes any amount included at part B of question P1.

Small businesses using the simplified depreciation rules have access to temporary full expensing. You cannot opt out of temporary full expensing for assets that the simplified depreciation rules apply to. For assets purchased from 7:30 pm AEDT on 6 October 2020 until 30 June 2023 you must deduct the taxable purpose proportion of all eligible depreciating assets (irrespective of value) in the income year they are first used, or installed ready for use, for a taxable purpose. The deduction amount is the taxable purpose proportion of the asset's cost less any decline in value between when you first held the asset and when it was first used or installed ready for use. These assets are not added to your small business pool.

Special rules apply if the depreciating asset is a car.

Under temporary full expensing you must also claim a deduction for the cost of improvements made from 7:30 pm AEDT on 6 October 2020 to 30 June 2023 to an asset that you had fully deducted under the simplified depreciation rules (including instant asset write-off) in an earlier income year, provided you have not previously claimed improvement costs for the asset. You must claim an immediate deduction for the taxable purpose proportion of the improvement cost and no threshold applies.

For income years ending between 7:30 pm AEDT on 6 October 2020 and 30 June 2023 inclusive you deduct the entire balance of the small business pool (there is no threshold for that period).

Some depreciating assets are excluded from these simplified depreciation rules, but a deduction may be available under the UCA rules.

For more information on the small business entity depreciation rules, see Simpler depreciation for small business or contact us.

5-year restriction

Small business entities that have previously elected out of the simplified depreciation rules are no longer subject to the ‘lock-out’ rule (which prevented small businesses from re-entering the simplified depreciation regime for 5 years if they had opted out). These entities may re-elect to use the simplified depreciation rules.

The suspension of the 5-year restriction only applies from 12 May 2015 to the end of an income year that includes 30 June 2023. For small businesses that have not adopted a substituted accounting period, the effect of the amendments is that the temporary suspension of the lock-out rule is extended to 30 June 2023.

To notify the Commissioner of the choice, lodge your tax return and keep relevant records for the required period of time. You do not need to lodge any other form to notify the Commissioner.

For more information, see Simplified depreciation for small business.

Calculating your depreciation deductions (Small business entities using simplified depreciation)

If your accounting system or financial statements provide you with the amounts to complete worksheet 2, enter these amounts in the worksheet. Otherwise, use calculations 1 to 4 to calculate your depreciation deductions.

The amounts you enter in worksheet 2 must be tax values and not accounting values.

Calculation 1: Deduction for certain assets using temporary full expensing

For assets you started to hold any time from 7:30 pm AEDT 6 October 2020 to 30 June 2023, and first used (or had installed ready for use) for a taxable purpose in 2022–23, you must deduct the taxable purpose proportion of the asset's cost under temporary full expensing.

Under temporary full expensing, you must also claim a deduction for the cost of improvements made in the 2022–23 year to an asset that you have fully deducted under the simplified depreciation rules (including instant asset write-off) in an earlier income year, provided you have not previously claimed improvement costs to the asset. You must claim an immediate deduction at this step for the taxable purpose proportion of the improvement cost and no threshold applies. Any later improvements will be added to the small business pool.

Work out the taxable purpose proportion of each of these types of assets. You calculate the deduction as follows:

• multiply each asset's adjustable value by taxable purpose proportion
• add up these results and enter the total at a in worksheet 2.

The adjustable value of an asset, at the time it was first used (or installed ready for use) for a taxable purpose, will be its cost unless the asset was previously used (or installed ready for use) by the small business solely for private purposes.

Do not include in this calculation amounts for depreciating assets that you held before using the simplified depreciation rules. These assets are allocated to the general small business pool.

Definitions

Adjustable value of a depreciating asset is its cost (excluding input tax credit entitlements) less its decline in value since you first used it or installed it ready for use for any purpose, including a private purpose.

Assessable balancing adjustment amount arises where the termination value of the depreciating asset is more than the adjustable value.

Cost addition amounts include the cost of capital improvements to assets and costs reasonably attributable to disposing of or permanently ceasing to use an asset (this may include advertising and commission costs or the costs of demolishing the asset).

Decline in value (previously ‘depreciation’) is the value that an asset loses over its effective life.

Deductible balancing adjustment amount arises where the termination value of the depreciating asset is less than the adjustable value.

Depreciating asset is an asset with a limited effective life which declines in value over that life.

Taxable purpose includes the purpose of producing assessable income.

Taxable purpose proportion is the extent to which you use the asset for a taxable purpose, such as for the purpose of producing assessable income.

Termination value includes, for example, money received from the sale of an asset or insurance money received as the result of the loss or destruction of an asset. Exclude the GST component where the amount received is for a taxable supply.

Calculation 2: General small business pool

If you used simplified depreciation in 2021–22

When you use the simplified depreciation rules, the opening balance of the general small business pool is the closing pool balance for the previous income year, adjusted to reflect any change in taxable purpose of a pooled asset. However, as you deducted the entire balance of the small business pool under temporary full expensing in 2021–22, the opening balance of the pool for 2022–23 is $0.

Additions to the opening pool balance

Any assets that you start to hold during the relevant period (7:30 pm (AEDT) 6 October 2020 and 30 June 2023) and first use, or instal ready for use, in 2022–23 are fully deducted under temporary full expensing (see step 1). Therefore, no assets first used, or installed ready for use, in 2022–23 are allocated to the pool.

If you incur improvement costs for an asset in 2022–23 and you have already fully deducted the cost of that asset in an earlier income year (whether under temporary full expensing or another instant asset write-off threshold), the improvement costs are also fully deducted under temporary full expensing (see step 1). You do not allocate the improvement costs to the pool.

If, however, you have already fully deducted an improvement cost for an asset in an earlier income year, and you incur further improvement costs for the asset in 2022–23, you must allocate the asset to the pool. The value of the asset is equal to the cost of those further improvements.

If you incur costs associated with disposing of, or otherwise ceasing to hold, an asset allocated to the pool, those costs are added to the pool.

Subtractions from the opening pool balance

If you cease to hold an asset that has been allocated to the pool in 2022–23, or an earlier income year, the taxable purpose proportion of the termination value is subtracted from the pool balance (see step 4b).

If that subtraction results in pool balance going below zero, the amount below zero is included in your assessable income at Reconciliation items section at question P8 and there is no deduction under temporary full expensing for your general pool balance 2022–23.

However, if the pool balance at the end of 2022–23 is greater than zero (after any subtractions for balancing adjustment events happening to assets allocated to the general small business pool), you must deduct the entire general pool balance under temporary full expensing in 2022–23.

Write the amount at b of worksheet 2.

Closing pool balance

The closing pool balance for this year becomes the opening pool balance for 2023–24, after any adjustments to reflect any change in taxable purpose of a pooled asset. You will have a closing pool balance for 2022–23 of $0.

If you started to use simplified depreciation in 2022–23

If you started to use the simplified depreciation rules in 2022–23, your opening pool balance is the sum of the taxable purpose proportions of the adjustable values of those depreciating assets:

• that you held and used (or installed ready for use), just before the start of 2022–23, and
• that were not excluded from the simplified depreciation rules.

Additions/subtractions to the pool balance

Any assets that you start to hold during the relevant period (7:30 pm (AEDT) 6 October 2020 and 30 June 2023) and first use, or instals ready for use, in 2022–23 are fully deducted under temporary full expensing (see step 1). Therefore, no assets first used, or installed ready for use, in the 2022–23 income year are allocated to the pool.

If you incur improvement costs in 2022–23 to an asset that you held just before the start of 2022–23 and which you allocated to the small business pool, the taxable purpose proportion of those costs are added to the pool.

If you incur costs associated with disposing of, or otherwise ceasing to hold, an asset allocated to the pool, those costs are added to the pool.

If you cease to hold an asset that was allocated to the general small business pool, subtract the taxable purpose proportion of the termination value of the asset from the pool balance (see step 4b).

• If that subtraction results in the pool balance at the end of 2022–23 going below zero
  • include the amount below zero in your assessable income at Reconciliation items section at question P8
  • there is no deduction under temporary full expensing for your general pool balance in 2022–23. 
   
• If the pool balance at the end of 2022–23 is greater than zero (after subtractions for balancing adjustment events happening to assets allocated to the general small business pool), under temporary full expensing
  • deduct the entire general pool balance
  • write the result at b of worksheet 2. 
   

Closing pool balance

The closing pool balance for this year becomes the opening pool balance for 2023–24, after any adjustments to reflect the change in taxable purpose of a pooled asset.

Your closing pool balance for 2022–23 is $0.

Do not write the closing pool balance in your tax return.

Calculation 3: Other depreciating assets

Work out your deduction for the decline in value of all your other depreciating assets that are not included in Calculations 1 and 2.

For more information on how to calculate the decline in value of these assets, see Guide to depreciating assets 2023.

Enter your total deduction for other depreciating assets at c in worksheet 2.

Do not include at c in the worksheet depreciating assets which qualify for a deduction under Subdivision 40-F or 40-G of the ITAA 1997 as water facilities, fencing assets, fodder storage assets, landcare operations, electricity connections or telephone lines in your primary production business and for which you have chosen to claim a deduction under those Subdivisions and not these small business entity depreciation rules. Show these deductions at question P8 – label W Landcare operations and deduction for decline in value of water facility, fencing asset and fodder storage asset .

Calculation 4: Ceasing to hold depreciating assets

Calculation 4a Assets for which you claimed an immediate deduction

If a balancing adjustment event happened to a depreciating asset for which you claimed an immediate deduction in calculation 1 this year, or in a prior year under the relevant instant asset write off threshold, include the taxable purpose proportion of the termination value of that asset as income in the Reconciliation items section of question P8.

A balancing adjustment event occurs when you stop holding a depreciating asset; for example, when you sell the asset, or the asset is lost or destroyed. Termination value includes, for example, money you received from the sale of an asset or insurance money you received.

Calculation 4b Assets allocated to the general small business pool

If you ceased to hold a depreciating asset that you allocated to the general small business pool:

• in 2022–23, or
• in a previous income year due to the instant asset write off threshold that applied at the time
• subtract the taxable purpose proportion of the termination value from the pool balance
  • For example, for a pooled depreciating asset
    • which you used only 60% for an income-producing purpose, and
    • which you sold for $3,000 (excluding GST)
    • subtract only $1,800 from the pool balance.
     
   

If, after making the subtraction, the pool balance is more than $0, write this deduction against general small business pool assets at b in worksheet 2 (if you have not already done so at step 2).

If the pool balance is less than zero, you include the amount below zero in your question P8 – Reconciliation items section (if you have not already done so at step 2).

If expenses are incurred in disposing of, or otherwise ceasing to hold, a depreciating asset, these expenses may be taken into account in step 2 by adding them to the pool balance.

Calculation 4c Other depreciating assets

For information on how to calculate any balancing adjustment amounts on the disposal of other depreciating assets, see Guide to depreciating assets 2023.

You can also work out your depreciation and capital allowance claims by using the Depreciation and capital allowances tool.

Balancing adjustment amounts are included in the Reconciliation items section of question P8. See What are income reconciliation adjustments? and What are expense reconciliation adjustments?.

Worksheet 2 – Depreciation deductions (small business entities using simplified depreciation only)

Row	Calculation elements	Primary production	Non-primary production	Total
a	Certain assets immediately deducted using temporary full expensing	$	$	$
b	General small business pool	$	$	$
c	Other depreciating assets	$	$	$
d	Depreciation expenses: add the amounts at rows a, b and c.	$	$	$

Completing this question

Step 1 Show your total primary production depreciation deductions at Depreciation expenses in the Primary production column, question P8. Do not show cents.

Step 2 Show your total non-primary production depreciation deductions at Depreciation expenses in the Non-primary production column. Do not show cents.

Do not show any amount included at part B of question P1.

Step 3 Transfer the amount at row d in worksheet 2 to question P8 – label M Depreciation expenses. Do not show cents.

Step 4 Transfer the amount at row a in worksheet 2 to question P10 – label A. Do not show cents.

Step 5 Transfer the amount at row b in worksheet 2 to question P10 – label B. Do not show cents.

Step 6 Go to Motor vehicle expenses.

You can also work out your depreciation and capital allowance claims by using the Depreciation and capital allowances tool.

Other businesses (excluding small businesses using simplified depreciation)

You need to know

You show at question P8 – label M Depreciation expenses the depreciation claimed in your books of account other than for those assets allocated in a prior year to a general pool or a long-life pool. For assets allocated to such a pool, include here the amount of the pool deduction to be claimed for tax purposes.

For more information, see Definitions.

The depreciation amount you show at question P8 – label M should not include profit or loss on the sale of depreciating assets. Include profits on the sale of depreciating assets in Other business income at Income section of question P8 – labels I or J in your schedule. You should include losses on the sale of depreciating assets at All other expenses in the Expenses section.

Accounting or book depreciation may differ from the deduction for the decline in value of depreciating assets.

You carry out the reconciliation between accounting depreciation and the deduction for decline in value at label H Expense reconciliation adjustments in the Reconciliation items section of question P8.

For more information, see:

• Depreciation and capital allowances tool
• Guide to depreciating assets 2023

Is expenditure revenue or capital in nature?

PS LA 2003/8 Practical approaches to low-cost business expenses provides guidance on 2 straightforward methods that can be used by taxpayers carrying on a business to help determine whether expenditure incurred to acquire certain low-cost items is to be treated as revenue expenditure or capital expenditure.

Subject to certain qualifications, the 2 methods cover expenditure below a threshold and the use of statistical sampling to estimate total revenue expenditure on low-cost items. The threshold rule allows an immediate deduction for qualifying low-cost business items costing $100 or less. The sampling rule allows taxpayers with a low-value pool to use statistical sampling to determine the proportion of the total purchases on qualifying low-cost business items that are revenue expenditure.

We will accept a deduction for expenditure incurred on low-cost assets calculated in accordance with this practice statement.

Completing this question

Step 1 Show your total primary production depreciation expenses at Depreciation expenses in the Primary production column, question P8 in your schedule. Do not show cents.

Step 2 Show your total non-primary production depreciation expenses at Depreciation expenses in the Non-primary production column. Do not show cents.

Step 3 Add up your primary production and non-primary production depreciation expenses and show the total at label M Depreciation expenses.

Motor vehicle expenses

Did you have motor vehicle expenses in your business?

No	Go to Repairs and maintenance.
Yes	Read on.

You need to know

Special substantiation and calculation rules for car expenses apply to you, as an individual. Under these rules, you can claim motor vehicle expenses using one of 2 methods where the expense is for a car, station wagon, panel van, utility truck or other road vehicle designed to carry a load of less than one tonne or fewer than 9 passengers. For an explanation of these methods, see question D1 in Individual tax return instructions 2023.

Include motor vehicle expenses related to ride-sourcing activities at this question.

Do not include depreciation, finance leasing charges or interest paid. You include these at question P8 in your schedule under:

• M Depreciation expenses
• J Lease expenses
• Q Interest expenses within Australia, or
• R Interest expenses overseas.

Completing this question

Step 1 Show your total primary production motor vehicle expenses at Motor vehicle expenses in the Primary production column, question P8 in your schedule. Do not show cents.

Step 2 Show your total non-primary production motor vehicle expenses at Motor vehicle expenses in the Non-primary production column. Do not show cents.

Step 3 Add up your primary production and non-primary production motor vehicle expenses and show the total at question P8 – label N in your schedule.

Step 4 If you worked out the amount you are claiming for motor vehicle expenses using one of the 2 methods described in question D1 in Individual tax return instructions 2023, find the code letter that identifies the method you used and print it in the Type box at the right of the amount at label N:

• S if you used the ‘cents per kilometre’ method
• B if you used the ‘logbook’ method.

Print the code letter N in the Type box if the amount shown at label N relates to:

• a motorcycle
• a taxi taken on hire
• a road vehicle designed to carry a load of one tonne or more, or 9 or more passengers
• any other motor vehicle expenses covered by question D2 in Individual tax return instructions 2023.

If you have more than one code, print the code that applies to the largest claim.

Repairs and maintenance

Did you have repairs and maintenance as a business expense?

No	Go to All other expenses.
Yes	Read on.

You need to know

This is expenditure shown in your accounts for repairs and maintenance of premises, plant, machinery, implements, utensils, rolling stock or articles associated with the production of income. Any non-deductible expenditure, such as items of a capital nature or amounts relating to private use of an item, included at this question, should also be included at label H Expense reconciliation adjustments in the Reconciliation items section question P8 in your schedule. The following information on deductions for repairs will assist you to work out whether you need to make an expense reconciliation adjustment.

Repairs

You may deduct the cost of repairs (not being expenditure of a capital nature) to premises and depreciating assets such as plant, machinery or equipment used solely for producing assessable income, or in carrying on a business for that purpose.

Expenditure on repairs to property used partially for business or income-producing purposes (such as where the property is also used for private purposes or in the production of exempt income) is deductible only to the extent it is used for business or income-producing purposes.

Where items are newly acquired, including by way of a legacy or gift, the cost of repairs to defects present at the time of acquisition is generally of a capital nature.

Expenditure incurred in making alterations, additions or improvements is of a capital nature and is not deductible as repairs.

For more information, see TR 97/23 Income tax: deductions for repairs.

Records you need to keep

To support your claim for the cost of repairs, you must keep full details, including source documents of the nature and cost of repairs to each item.

Completing this question

Step 1 Show your total primary production repairs and maintenance expenses at Repairs and maintenance in the Primary production column, question P8 in your schedule. Do not show cents.

Step 2 Show your total non-primary production repairs and maintenance expenses at Repairs and maintenance in the Non-primary production column. Do not show cents.

Step 3 Add up your primary production and non-primary production repairs and maintenance expenses and show the total at label O. Do not show cents.

All other expenses

Did you have any other business expenses?

No	Go to Total expenses.
Yes	Read on.

You need to know

This is the total of all other expenses which you incurred in deriving your profit or loss and which you have not already shown elsewhere at question P8. Other expenses include wages, accounting and professional fees, advertising, office supplies, foreign exchange (forex) losses and any loss on the sale of a depreciating asset as shown in your accounts.

Include gifts and donations that are a business expense and amounts you pay professionals in managing the tax affairs of the business at question P8. Do not claim these amounts as gifts and donations or as cost of managing tax affairs in your individual tax return.

If you are an eligible primary producer also include deductions related to becoming the holder of, holding and disposing of eligible ACCUs or income from eligible arrangements with carbon service providers, in the primary production column. For more information on eligible ACCUS and eligible arrangements with carbon service providers, see Taxation of Australian carbon credit units for primary producers.

For information about forex losses, go to ato.gov.au or see question D15 in Individual tax return instructions supplement 2023.

Include capital and other non-deductible items (including debt deductions denied by thin capitalisation rules) shown here at label H Expense reconciliation adjustments in the Reconciliation items section of question P8 in your schedule.

For more information, see:

• Income and expense reconciliation adjustments
• Thin capitalisation.

Home office expenses

If part of your home was specifically set aside as your place of business and used solely for the purpose of conducting your business affairs and you had no other place from where they were mainly carried on, the following expenses are partly deductible:

• occupancy expenses, including rent, mortgage interest, rates, and house and contents insurance
• running expenses, including electricity, cleaning, depreciation, leasing charges and repairs to furniture and furnishings in the office.

In most cases, you can apportion expenses on a floor area basis and, if the area of your home was a place of business for only part of the year, on a time basis.

Where you used part of your home as a home office but it did not qualify as a place of business, only the additional running expenses you incurred may be deductible.

For more information, see:

• TR 93/30 Income tax: deductions for home office expenses
• PS LA 2001/6 Verification approaches for home office running expenses and electronic device expenses records you need to keep
• PCG 2023/1 Claiming a deduction for additional running expenses incurred while working from home – ATO compliance approach

You should keep records to show how you have calculated your home office expenses. We may ask you for these at a later date.

Completing this question

Step 1 Show your total ‘other’ primary production expenses at All other expenses in the Primary production column, question P8 in your schedule. Do not show cents.

Step 2 Show your total ‘other’ non-primary production expenses at All other expenses in the Non-primary production column. Do not show cents.

Step 3 Add up your ‘other’ primary production and ‘other’ non-primary production expenses and show the total at question P8 – label P in your schedule.

Total expenses

Completing this question

Step 1 Add up all the expenses you have written in the Primary production column, from Cost of sales down to and including All other expenses. Show the total at question P8 – label S in your schedule. Do not show cents.

Step 2 If your total of primary production expenses is a negative amount, print L in the box at the right of the amount at label S.

Step 3 Add up all the expenses you have written in the Non-primary production column, from Cost of sales down to and including All other expenses. Show the total at label T. Do not show cents.

Step 4 If your total of non-primary production expenses is a negative amount, print L in the box at the right of the amount at label T.

Step 5 Add up your primary production and non-primary production expenses. Show the total at TOTAL EXPENSES in the Totals column.

Step 6 If your total expenses is a negative amount, print L in the box at the right of this amount.

Reconciliation items

Consider the following items to see whether you qualify for a deduction.

Any adjustments to your income and expense amounts are dealt with at Income and expense reconciliation adjustments.

Section 40-880 deduction

Can you deduct business-related costs under section 40-880?

No	Go to Business deduction for project pool.
Yes	Read on.

Immediate deductibility for business-related start-up costs

Section 40-880 of the Income Tax Assessment Act 1997 allows for certain start-up costs to be immediately deductible where they are incurred by:

• a small business entity
• an entity that would be a small business entity if the aggregated turnover threshold was less than $50 million or
• an entity that is not in business and is not connected with or an affiliate of another entity that is carrying on a business and that entity
  • is not a small business entity, and
  • would not be a small business entity if the aggregated turnover threshold was less than $50 million.
   

If you are an individual (operating either alone or in partnership), the non-commercial loss provisions may apply to defer your deduction to a later income year.

Claimable business-related start-up costs

Expenses can be fully deductible in the year in which the expenditure is incurred if the expenditure relates to a business that is proposed to be carried on and is either:

• incurred in obtaining advice or services relating to the proposed structure or the proposed operation of the business
• a payment to an Australian government agency of a fee, tax or charge incurred in relation to setting up the business or establishing its operating structure.

For more information, see Claiming a tax deduction for depreciating assets and other capital expenses.

5-year write-off for a range of business-related costs not recognised elsewhere in the tax law

Section 40-880 also provides a 5-year write-off for certain capital expenditure incurred by you in relation to a past, present or prospective business if the expenditure is not already taken into account or not denied a deduction by another provision.

You can claim a deduction for capital expenditure:

• in relation to your business
• in relation to a business that used to be carried on, such as capital expenses incurred in order to cease the business
• in relation to a business proposed to be carried on, such as the costs of feasibility studies, market research or setting up the business entity
• as a shareholder, beneficiary or partner to liquidate or deregister a company or to wind up a trust or partnership (the company, trust or partnership must have carried on a business).

If you incur expenditure in relation to your existing business, a business that you used to carry on or a business that you propose to carry on, the expenditure is deductible to the extent the business is, was, or is proposed to be, carried on for a taxable purpose.

You cannot deduct expenditure in relation to an existing business that is carried on by another entity. However, you can deduct expenditure you incur in relation to a business that used to be, or is proposed to be, carried on by another entity. The expenditure is only deductible to the extent that:

• the business was, or is proposed to be, carried on for a taxable purpose
• the expenditure is in connection with the business that was or is proposed to be carried on and with you deriving assessable income from the business.

You can deduct 20% of the expenditure in the year you incur it and in each of the following 4 years. However, for some pre- and post-business expenditure, you may have to defer your claim for a deduction because the non-commercial loss rules apply.

For more information, see Losses.

The deduction cannot be claimed for capital expenditure if it:

• can be deducted under another provision
• forms part of the cost of a depreciating asset you hold, used to hold or will hold
• forms part of the cost of land
• relates to a lease or other legal or equitable right
• would be taken into account in working out an assessable profit or deductible loss
• could be taken into account in working out a capital gain or a capital loss
• would be specifically not deductible under the income tax laws if the expenditure was not capital expenditure
• is specifically not deductible under the income tax laws for a reason other than the expenditure is capital expenditure
• is of a private or domestic nature
• is incurred in relation to gaining or producing exempt income or non-assessable non-exempt income
• is excluded from the cost or cost base of an asset because, under special rules in the UCA or capital gains tax regimes respectively, the cost or cost base of the asset was taken to be the market value
• is a return of or on capital or is a return of a non-assessable amount (for example, repayments of loan principal).

Claim the amount deductible under section 40-880 here if:

• you carried on a business as an individual at any time during 2022–23, or
• the amount relates to a proposed primary production or performing arts business.

If you have incurred relevant capital expenses that relate to a business that ceased in a previous income year and you carried on the business as a sole trader or through a partnership, claim the expenses here. If you carried on the business through a company or trust, you claim the amount deductible (20%) at question D15 in your supplementary tax return.

You must show any recoupment of the expenditure as assessable income, either at Other business income or as part of your Income reconciliation adjustments in the Reconciliation items section of question P8 in your schedule.

Completing this question

Step 1 Show your deduction for primary production business-related costs at Section 40-880 deduction in the Primary production column, question P8 in your schedule. Do not show cents.

Step 2 Show your deduction for non-primary production business-related costs at Section 40-880 deduction in the Non-primary production column. Do not show cents.

Step 3 Add up your primary production and non-primary production deductions for business-related costs and show the total at label A.

Business deduction for project pool

Did you have capital expenditure directly connected with a business project?

No	Go to Landcare operations and deduction for decline in value of water facility, fencing asset and fodder storage asset.
Yes	Read on.

You need to know

Certain capital expenditure you incurred after 30 June 2001 which is directly connected with a project you carry on or propose to carry on for a taxable purpose can be allocated to a project pool and written off over the life of the project. Each project has a separate project pool. The project must be of sufficient substance and be sufficiently identified that it can be shown that the capital expenditure said to be a ‘project amount’ is directly connected with the project.

You are carrying on a project if it involves a continuity of activity and active participation. Merely holding a passive investment, such as a rental property, would not be regarded as carrying on a project.

Such capital expenditure, known as a project amount, is expenditure incurred on:

• creating or upgrading community infrastructure for a community associated with the project; this expenditure must be paid (not just incurred) to be a project amount
• site preparation for depreciating assets (other than to drain swamp or low-lying land or to clear land for horticultural plants, including grapevines)
• feasibility studies for the project
• environmental assessments for the project
• obtaining information associated with the project
• seeking to obtain a right to intellectual property
• ornamental trees or shrubs.

Project amounts also include mining capital expenditure and expenditure on certain facilities used to transport minerals or quarry materials.

For more information, see Guide to depreciating assets 2023

The expenditure must not be otherwise deductible or form part of the cost of a depreciating asset. If the expenditure incurred arises from a non-arm’s length dealing and is more than the market value of what it was for, the amount of the expenditure is taken to be that market value.

Project amounts are allocated to a ‘project pool’. Your deduction for project amounts allocated to a project pool is spread over the ‘project life’. The project life is the period from the date on which the project starts to operate until the date on which it stops operating. The period must be limited by something inherent in the project. If there is no limited project life, no deduction is available under these rules.

A deduction is available from the income year in which you started to operate a project to gain or produce assessable income. The deduction is worked out on the value of the project pool at the end of the income year at the rate of 150%. For pools containing only project amounts incurred on or after 10 May 2006 for projects starting on or after that day, the rate is 200%. Your deductions are capped at 150% if on or after 10 May 2006 you abandon, sell or otherwise dispose of an existing project and then restart it after that date in circumstances where it would be reasonable to conclude that this was done for the main purpose of ensuring that deductions would be calculated using the higher rate.

Use worksheet 3A or worksheet 3B to work out your deduction.

Worksheet 3A – Project pool deduction for projects which started on or after 10 May 2006

Row	Calculation elements	Amount
a	Value of the project pool at 30 June 2023. This is the closing pool value for 2021–22 (if any) plus the sum of the project amounts you allocated to the pool in 2022–23.	$
b	Your estimate of the life of the project (in years)	years
c	Divide the amount at row a by the amount at row b.	$
d	Multiply the amount at row c by 200%. This is your 2022–23 deduction for the project pool.	$

Your deduction at row d must not be more than the amount at row a.

If a project operated in 2022–23 for purposes other than earning assessable business income, you must reduce your deduction at row d by a reasonable amount for the extent to which the project operated for such other purposes.

Worksheet 3B – Project pool deduction for projects which started before 10 May 2006

Row	Calculation elements	Amount
a	Value of the project pool at 30 June 2023. This is the closing pool value for 2021–22 (if any) plus the sum of the project amounts you allocated to the pool in 2022–23.	$
b	Your estimate of the life of the project (in years)	years
c	Divide the amount at row a by the amount at row b.	$
d	Multiply the amount at row c by 150%. This is your 2022–23 deduction for the project pool.	$

Your deduction at row d must not be more than the amount at row a.

If a project operated in 2022–23 for purposes other than earning assessable business income, you must reduce your deduction at row d by a reasonable amount for the extent to which the project operated for such other purposes.

The pool value can be subject to adjustments, for example, a foreign exchange (forex) adjustment may apply where you met an obligation to pay foreign currency incurred as a project amount which you had allocated to a project pool.

Closing pool value for 2022–23

This is row a minus row d in worksheet 3A and worksheet 3B. You will need the closing pool value for 2022–23 to work out your deduction for the project pool next year.

Any recoupment of the expenditure must be shown as assessable income either at Other business income or as part of your Income reconciliation adjustments in the Reconciliation items section of question P8 in your schedule.

Where a project was abandoned, sold or otherwise disposed of in 2022–23

In this case, whether or not the project had begun to operate, you can claim a deduction for the 2021–22 closing pool value (if any) plus any project amounts allocated to the pool in the 2022–23 year. You must show any proceeds from the abandonment, sale or disposal of the project as assessable income either at Other business income or as part of your Income reconciliation adjustments in the Reconciliation items section of your schedule.

Completing this question

Step 1 Show your total primary production project pool business deduction at Business deduction for project pool in the Primary production column, question P8 in your schedule. Do not show cents.

Step 2 Show your total non-primary production project pool business deduction at Business deduction for project pool in the Non-primary production column. Do not show cents.

Step 3 Add up your primary production and non-primary production project pool business deductions and show the total at label L.

Landcare operations and deduction for decline in value of water facility, fencing asset and fodder storage asset

Did you have any of the following expenses:

• landcare operations
• water facilities
• fencing assets
• fodder storage assets?

No	Go to Income and expense reconciliation adjustments.
Yes	Read on.

Landcare operations expenses

You can claim a deduction for capital expenditure you incur on a landcare operation for land in Australia in the year it is incurred.

If the water facilities and landcare operation rules both apply, you can only deduct the expenditure as expenditure on a water facility; see Water conservation and conveyance facilities. If the carbon sink forest and landcare operation rules both apply, you can only deduct the expenditure as expenditure on carbon sink forests.

Unless you are a rural land irrigation water provider, the deduction is available if you use the land for either:

• a primary production business, or
• in the case of rural land, a business for the purpose of producing assessable income from the use of that land, except a business of mining or quarrying.

However, your deduction is reduced by a reasonable amount to reflect your use of the land other than for the purpose of carrying on the relevant business in an income year after you incurred the expenditure.

You may claim the deduction even if you are only a lessee of the land.

Rural land irrigation water providers can claim a deduction for certain expenditure they incur. A rural land irrigation water provider is an entity whose business is primarily and principally supplying water to entities for use in primary production businesses on land in Australia or businesses (except mining or quarrying businesses) using rural land in Australia. The supply of water by using a motor vehicle is excluded.

If you are a rural land irrigation water provider, you can claim a deduction for capital expenditure you incurred on a landcare operation for land used by other entities that you supply with water if the land is:

• located in Australia that those entities use at the time for primary production businesses, or
• rural land in Australia that those entities use at the time for carrying on businesses for a taxable purpose, except a business of mining or quarrying.

If you are a rural land irrigation water provider, your deduction is reduced by a reasonable amount for your use of the land for a non-taxable purpose in an income year after you incurred the expenditure.

A landcare operation is one of the following:

1. erecting fences to separate different land classes in accordance with an approved land management plan
2. erecting fences primarily and principally to keep animals out of areas affected by land degradation in order to prevent or limit further damage and assist in reclaiming the areas
3. constructing a levee or similar improvements
4. constructing drainage works, other than the draining of swamps or low-lying land, primarily and principally to control salinity or assist in drainage control
5. an operation primarily and principally for eradicating or exterminating animal pests from the land
6. an operation primarily and principally for eradicating, exterminating or destroying plant growth detrimental to the land
7. an operation primarily and principally for preventing or fighting land degradation other than by erecting fences, or
8. an extension, alteration or addition to any of the assets described in 1 to 4 above or an extension of an operation described in 5 to 7 above.

A landcare operation also includes:

• a repair of a capital nature to an asset described in 1 to 4 above
• constructing a structural improvement that is reasonably incidental to levees (or similar improvements) or drainage works deductible as capital expenditure on a landcare operation
• a repair of a capital nature, or an alteration, addition or extension to a structural improvement that is reasonably incidental to levees (or similar improvements) or drainage works deductible as capital expenditure on a landcare operation.

An example of a structural improvement that may be reasonably incidental to drainage works is a fence constructed to prevent livestock entering a drain that was constructed to control salinity.

No deduction is available if the capital expenditure is on plant unless it is on certain fences, dams or other structural improvements.

If the expenditure incurred arose from a non-arm’s length dealing and was more than the market value of what the expenditure was for, the amount of the expenditure is taken to be that market value instead.

These deductions are not available to a partnership. Expenses for landcare operations incurred by a partnership are allocated to each partner, who can then claim the relevant deduction for their share of the expenditure.

You may need to show any recoupment of the expenditure as assessable income either at Other business income in the Income section of question P8 in your schedule or as part of your Income reconciliation adjustments in the Reconciliation items section of question P8.

For more information, see Guide to depreciating assets 2023.

Water conservation and conveyance facilities

You can claim a deduction for the decline in value of a water facility. A water facility includes plant or a structural improvement, or an alteration, addition or extension to plant or a structural improvement, that is primarily or principally for the purpose of conserving or conveying water.

Water facility includes dams, tank stands, bores, wells, irrigation channels, pipes, pumps, water towers and windmills. Water facility also includes certain other expenditure incurred on or after 1 July 2004 for:

• a repair of a capital nature to plant or a structural improvement that is primarily or principally for the purpose of conserving or conveying water, for example, if you purchase a pump that needs substantial work done to it before it can be used in your business, the cost of repairing the pump may be treated as a water facility
• a structural improvement, or an alteration, addition or extension to a structural improvement that is reasonably incidental to conserving or conveying water
• a repair of a capital nature to a structural improvement that is reasonably incidental to conserving or conveying water.

Examples of structural improvements that are reasonably incidental to conserving or conveying water include a bridge over an irrigation channel, a culvert (a length of pipe or multiple pipes that are laid under a road to allow the flow of water in a channel to pass under the road), or a fence preventing livestock entering an irrigation channel.

You can fully deduct capital expenditure on a water facility if you incurred the expenditure from 7:30 pm (AEST), 12 May 2015. You fully deduct the expenditure in the year you incurred it. The total deduction cannot be more than the amount of the capital expenditure.

Unless you are an irrigation water provider, the expenditure must be incurred primarily and principally for conserving or conveying water for use in a primary production business you conduct on land in Australia. You may claim the deduction even when you do not own the land. Therefore, if you are a lessee carrying on a business of primary production on the land, you can still claim the deduction. Your deduction is reduced where the facility is not wholly used for either:

• carrying on a primary production business on land in Australia, or
• a taxable purpose, for example, producing assessable income.

An irrigation water provider is an entity whose business is primarily and principally the supply of water to entities for use in primary production businesses on land in Australia. The supply of water by using a motor vehicle is excluded.

If you are an irrigation water provider, you must incur the expenditure primarily and principally for the purpose of conserving or conveying water for use in primary production businesses conducted by other entities on land in Australia (being entities supplied with water by you). The deduction is reduced if the facility is not used wholly for a taxable purpose.

If the expenditure incurred arose from a non-arm’s length dealing and was more than the market value of what the expenditure was for, the amount of the expenditure is taken to be that market value instead.

These deductions are not available to a partnership. Costs incurred by a partnership for facilities to conserve or convey water are allocated to each partner who can then claim the relevant deduction for their share of the expenditure.

You may need to show any recoupment of the expenditure as assessable income either:

• at Other business income in the Income section of question P8 in your schedule, or
• as part of your Income reconciliation adjustments in the Reconciliation items section of question P8.

For more information, see Guide to depreciating assets 2023.

Fencing assets

You can claim a deduction for the decline in value of a fencing asset. A fencing asset includes a structural improvement, a repair of a capital nature, or an alteration, addition or extension to a fence.

If you incurred the expenditure in 2022–23 you claim the full amount in 2022–23. If you incurred the expenditure before 13 May 2015 (or if the expenditure relates to a stockyard, pen or portable fence), the previous decline in value rules that apply to fences based on their effective life continue to apply.

The expenditure must be incurred by you on the construction, manufacture, installation or acquisition of a fencing asset that is used primarily and principally in a primary production business you conduct on land in Australia. You may claim the deduction even when you do not own the land. Therefore, if you are a lessee carrying on a business of primary production on the land, you can still claim the deduction. Your deduction is reduced where the fencing asset is not wholly used for either:

• carrying on a primary production business on land in Australia, or
• a taxable purpose, for example, producing assessable income.

If the expenditure incurred arose from a non-arm’s length dealing and was more than the market value of what the expenditure was for, the amount of the expenditure is taken to be that market value instead.

These deductions are not available to a partnership. Costs incurred by a partnership on fencing assets are allocated to each partner who can then claim the relevant deduction for their share of the expenditure.

You may need to show any recoupment of the expenditure as assessable income either at Other business income in the Income section of question P8 or as part of your Income reconciliation adjustments in the Reconciliation items section of question P8.

For more information, see Guide to depreciating assets 2023.

Fodder storage assets

You can claim a deduction for the decline in value of a fodder storage asset. A fodder storage asset is an asset that is primarily and principally for the purpose of storing fodder. It includes a structural improvement, a repair of a capital nature, or an alteration, addition or extension, to an asset or structural improvement, that is primarily and principally for the purpose of storing fodder.

Fodder refers to food for livestock, usually but not exclusively dried, such as grain, hay or silage. Fodder can include liquid feed and supplements. Examples of typical fodder storage assets include:

• silos
• liquid feed supplement storage tanks
• bins for storing dried grain
• hay sheds
• grain storage sheds, and
• above-ground bunkers.

If you incurred the expenditure from 19 August 2018, you deduct the full amount in the income year in which you incurred it. If you incurred the expenditure between 7:30 pm (AEST), 12 May 2015 and 18 August 2018 you deduct one-third of the amount in the income year in which you incurred it, and one-third in each of the following 2 years, except if you first used the asset or installed it ready for use on or after 19 August 2018. In that case, you deduct the full amount in the income year in which you incurred it (this may require an amendment to a prior year tax return).

If you incurred the expenditure before 7:30 pm AEST, 12 May 2015, the previous decline in value rules that apply to fodder storage assets based on their effective life continue to apply.

The expenditure must be incurred by you on the construction, manufacture, installation or acquisition of a fodder storage asset that is used primarily and principally in a primary production business you conduct on land in Australia. You may claim the deduction even when you do not own the land. Therefore, if you are a lessee carrying on a business of primary production on the land, you can still claim the deduction. Your deduction is reduced where the fodder storage asset is not wholly used for either:

• carrying on a primary production business on land in Australia, or
• a taxable purpose, for example, for producing assessable income.

If the expenditure incurred arose from a non-arm’s length dealing and was more than the market value of what the expenditure was for, the amount of the expenditure is taken to be that market value instead.

These deductions are not available to a partnership. Costs incurred by a partnership on fodder storage assets are allocated to each partner who can then claim the relevant deduction for their share of the expenditure.

You may need to show any recoupment of the expenditure as assessable income either at Other business income in the Income section of question P8 or as part of your Income reconciliation adjustments in the Reconciliation items section of question P8.

For more information, see Guide to depreciating assets 2023.

Small business entities

The amount you show at W must not include any amount relating to a depreciating asset used in your primary production business if you have chosen to claim a deduction for it under the small business entity depreciation rules.

Completing this question

Step 1 Show your total deductions for primary production landcare operations expenses, water facilities, fencing assets and fodder storage assets at Landcare operations and deduction for decline in value of water facility, fencing asset and fodder storage asset in the Primary production column, question P8. Do not show cents.

Step 2 Show your total deduction for non-primary production landcare operations expenses and water facilities at Landcare operations and deduction for decline in value of water facility, fencing asset and fodder storage asset in the Non-primary production column. Do not show cents.

Step 3 Add up your primary production and non-primary production deductions for landcare operations, water facilities, fencing assets and fodder storage assets and show the total at label W.

Income and expense reconciliation adjustments

Do you need to make any income or expense reconciliation adjustments?

No	Go to Net income or loss from business this year.
Yes	Read on.

You need to know

You may need to make income reconciliation adjustments or expense reconciliation adjustments. These adjustments reconcile your business operating profit or loss with your business taxable income.

Do not complete any income reconciliation adjustments or expense reconciliation adjustments if all the amounts you have written at label C Gross payments where Australian business number not quoted to label W Landcare operations and deduction for decline in value of water facility, fencing asset and fodder storage asset question P8 are assessable income or allowable tax deductions for income tax purposes.

You must work out your reconciliation adjustments if:

• you have included amounts such as exempt income or non-deductible expenses, or
• you have not included amounts which are assessable income or expenditure that is deductible.

Worksheet 4 will assist you with your calculations.

What are income reconciliation adjustments?

Income reconciliation adjustments include:

• income add backs; this is income not shown in the accounts which is assessable income for tax purposes, such as
  • assessable balancing adjustment amounts on disposal of depreciating assets
  • other assessable income not included in the profit and loss statement
   
• income subtractions; this is income shown in the accounts which is not assessable income, such as
  • profit on sale of depreciating assets
  • other income that is not assessable for income tax purposes, for example, gross exempt income and non-assessable non-exempt income
  • cash flow boost payments if they have been included in other business income.
   

Your income reconciliation adjustment is your total income add-backs less your total income subtractions.

Use worksheet 4 to work out your income reconciliation adjustments for your primary and non-primary production businesses. The amount you enter at question P8 – label X Income reconciliation adjustments is the total of your primary production and non-primary production income adjustments.

If the amount is negative, print L in the box at the right of the amount.

What are expense reconciliation adjustments?

Expense reconciliation adjustments include the following.

• Expense add backs are expenses shown in the accounts which are not tax deductible, such as
  • prepaid expenses not deductible in 2022–23
  • depreciation
  • loss on sale of a depreciating asset
  • other items not allowable as a deduction, for example    
    • capital expenditure
    • additions to provisions and reserves
    • income tax expense
    • expenses relating to exempt income
    • debt deductions denied by the thin capitalisation rules
    • other non-deductible expenses.
     
   
• Expense subtractions are items not shown as expenses in the accounts but which are deductible for tax purposes, such as
  • prepaid expenses from a prior year that are deductible in 2022–23 but not included elsewhere
  • deduction for decline in value of depreciating assets
  • deductible balancing adjustment amounts on disposal of depreciating assets
  • deduction for environmental protection expenses
  • bonus deduction for small business skills and training boost
  • bonus deduction for small business technology investment boost
  • other items deductible for tax purposes.
   

Your expense reconciliation adjustment is your total expense add-backs less your total expense subtractions.

Use worksheet 4 to work out your expense reconciliation adjustments for your primary and non-primary production businesses. The amount you show at question P8 – label H Expense reconciliation adjustments is the total of your primary production and non-primary production expense adjustments.

If the amount is negative, print L in the box at the right of the amount.

For more information, see Thin capitalisation

Specific reconciliation adjustments

Following are examples of specific reconciliation adjustments that may apply to you.

If you were previously in the STS read Former STS taxpayers below first.

Former STS taxpayers

Make adjustments in this section of question P8 if:

• you are eligible and have chosen to continue using the STS accounting method and the amounts you have shown at the Income and Expense sections of question P8 are not based on the STS accounting method, or
• you stopped using the STS accounting method in 2022–23.

These adjustments are explained in more detail at Adjustments when ceasing to use the STS accounting method.

Worksheet 4 will assist you with your calculations.

Income derived but not received at 30 June 2023 and expenses incurred but not paid at 30 June 2023

If you are eligible and have chosen to continue using the STS accounting method and have included at question P8 amounts of ordinary income that have been derived but not received in 2022–23, the amounts not received are not assessable this year, for example, trade debtors at 30 June 2023.

These amounts form part of your income reconciliation adjustments at question P8 – label X. Include these amounts at row f on worksheet 4.

If you are eligible and have chosen to continue using the STS accounting method and have included at question P8 amounts for general deductions, repairs and tax-related expenses that have been incurred but not paid in 2022–23, the amounts not paid are not deductible this year, for example, trade creditors at 30 June 2023.

These amounts form part of your expense reconciliation adjustments at question P8 – label H. Include these amounts at row n on worksheet 4.

Adjustments when ceasing to use the STS accounting method

If you have discontinued using the STS accounting method read on.

If you have not included at Income at question P8 amounts of ordinary income that were derived but not received while using the STS accounting method, these amounts are assessable in 2022–23, for example, trade debtors at 30 June 2022.

Include these amounts at row b on worksheet 4.

If you have not included at Expenses at question P8 amounts of general deductions, repairs or tax-related expenses that were incurred but not paid while using the STS accounting method, these amounts are deductible in 2022–23, for example, trade creditors at 30 June 2022.

Include these amounts (other than tax-related expenses) at row t on worksheet 4. Include your deduction for tax-related expenses at question D10 in your tax return.

Disposal of depreciating assets

If you disposed of depreciating assets during 2022–23, the following amounts form part of your Income reconciliation adjustments at question P8 – label X:

• the taxable purpose proportion of the termination value of assets that have been disposed of for which an immediate deduction has been claimed either in 2022–23 or in a prior income year
• if the closing pool balance of a general small business pool is less than zero, the amount below zero
• assessable balancing adjustment amounts on the disposal of depreciating assets not allocated to a general small business pool.

Include the amounts at row b on worksheet 4.

Deductible balancing adjustment amounts on the disposal of depreciating assets that you have not allocated to a small business pool form part of your Expense reconciliation adjustments at question P8 – label H. Include these amounts at q on worksheet 4.

For more information, see:

• Definitions
• Guide to depreciating assets 2023
• Depreciation and capital allowances tool

Prepaid expenses

Special rules may affect the timing of deductions for prepaid expenditure. Under these rules you may need to apportion certain prepaid expenses over more than one income year. You must make an expense reconciliation adjustment to add back that part of the expense that is not deductible in the income year in which it is incurred. Show the adjustment at row k on worksheet 4.

If you had a prepaid expense in a prior year which is to be apportioned over the service period and you are entitled to a deduction for part of the expense in 2022–23 but have not included it elsewhere, show the adjustment as an expense subtraction at row s on worksheet 4.

For more information, see Deductions for prepaid expenses 2023

Deduction for decline in value

You only add back amounts of depreciation expenses if you are not a small business entity using the simplified depreciation rules. If you are a small business entity using the simplified depreciation rules your tax deduction for decline in value is instead included in the amount at label M.

A deduction for a decline in value of a depreciating asset calculated under income tax law may differ from the accounting or book calculation of depreciation. Different rules regarding such things as effective life, the calculation of balancing adjustment amounts and the treatment of debt forgiveness amounts can produce a discrepancy between the 2 calculations.

Under income tax law you can deduct an amount equal to the decline in value of a depreciating asset in 2022–23 if you held the depreciating asset for any time during the year and used it (or installed it ready for use) for a taxable purpose, such as for producing assessable income.

The deduction is reduced to the extent you do not use the asset for a taxable purpose.

To help you calculate your deduction for decline in value, see the Depreciation and capital allowances tool or Guide to depreciating assets 2023, which also provides explanations of relevant terms. The publication also explains:

• temporary full expensing
• the option to allocate to a low-value pool depreciating assets that cost less than $1,000 (excluding input tax credit entitlements) and depreciating assets that have an opening adjustable value of less than $1,000.

Temporary full expensing

Businesses with an aggregated turnover of less than $5 billion can immediately deduct the taxable purpose proportion of the cost of eligible new depreciating assets. The eligible new assets must be first held from 7:30 pm AEDT on 6 October 2020 and 30 June 2023 and first used, or installed ready for use, for a taxable purpose in 2022–23. The deduction amount is the taxable purpose proportion of the asset's cost less any decline in value between when you first held the asset and when it was first used or installed ready for use.

For businesses with an aggregated turnover of less than $50 million, temporary full expensing also applies to the business portion of eligible second-hand depreciating assets.

Businesses can also immediately deduct the business portion of the cost of improvements to eligible depreciating assets (and to assets acquired before 7:30 pm AEDT on 6 October 2020 that would otherwise be eligible assets) if those costs were incurred between 7:30 pm AEDT on 6 October 2020 and 30 June 2023.

If a balancing adjustment event happens to an eligible asset in the same income year as when you first used the asset for a taxable purpose, you cannot deduct the cost of the asset (including costs of improvements) under temporary full expensing.

You also cannot deduct the costs of improvements under temporary full expensing if a balancing adjustment event happens in the income year you incurred those costs.

You cannot claim temporary full expensing for a depreciating asset if:

• It is ordinarily excluded under the UCA rules, such as a building or other capital works.
• It has been allocated to a low value or software development pool.
• It is an asset that falls within the special rules for assets used in connection with a primary production business.

The asset must be used principally in Australia for the principal purpose of carrying on a business. The asset must also be located in Australia.

A special balancing adjustment event will also occur in an income year after the year in which temporary full expensing has been claimed when:

• it is no longer reasonable to conclude that you will use the depreciating asset principally in Australia for the principal purpose of carrying on a business, or
• it becomes reasonable to conclude that the depreciating asset will never be located in Australia.

This special balancing adjustment event is not triggered if you use the simplified depreciation rules, other than for those depreciating assets that are excluded from the simplified depreciation rules. For those other depreciating assets, the event may still be triggered if you have claimed temporary full expensing with respect to that asset.

If this special balancing adjustment event is triggered:

• you are treated as though you have ceased to hold the asset and the termination value of the asset will be equal to its market value at that time, resulting in the temporary full expensing deduction being clawed back to the extent of the assets then market value, and
• the first element of cost is modified so that the first element of cost of the asset is the asset’s termination value at the time of the event, such that though you may not thereafter work out the decline in value for that asset using temporary full expensing, you might, in a later income year, be entitled to claim other capital allowances that you are entitled to for that asset (for example, under the general capital allowances rules for the proportion of business use). You may not claim a deduction for the asset under the general capital allowance rules in the same income year as the special balancing adjustment event.

You can make a choice to opt-out of temporary full expensing on an asset-by-asset basis in the income year the asset was first used or installed ready for use for a taxable purpose. If you are making a choice to opt-out of temporary full expensing you must notify us by recording that choice at question P11 – label C, D and E.

If you have incurred improvement costs in 2022–23 for an asset that you opted out of temporary full expensing for in a prior income year, you need to make a separate choice to opt out of TFE for the improvement costs if you do not want temporary full expensing to apply to those costs.

Luxury car leasing

A leased car, either new or second-hand, is a luxury car if its cost exceeds the car limit that applies for the income year in which the lease commences. The car limit for- 2022–23 is $64,741.

A luxury car lease (other than genuine short-term hire arrangements) is treated as a notional sale-and-loan transaction.

The cost or value of the car specified in the lease (or the market value if the parties were not dealing at arm’s length in connection with the lease) is taken to be the cost of the car for the lessee and the amount loaned by the lessor to the lessee to buy the car.

In relation to the notional loan, the actual lease payments are divided into notional principal and finance charge components. That part of the finance charge component for the notional loan applicable for the particular period (the accrual amount) is deductible to the lessee, subject to any reduction required under the thin capitalisation rules.

The amount forms part of your expense reconciliation adjustments at question P8 – label H in your schedule. Include the amount at row p on worksheet 4.

In relation to the notional sale, the lessee is treated as the holder of the luxury car and may be entitled to claim a deduction for the decline in value of the car. If the lessee is a small business entity using the simplified depreciation rules for the income year in which the lease is entered into, the lessee allocates the car to their general small business pool.

For the purpose of calculating the deduction, the cost of the car is limited to the car limit for the income year in which the lease is granted.

For more information on deductions for the decline in value of leased luxury cars, see Guide to depreciating assets 2023.

In summary, the lessee is entitled to deductions equal to:

• the accrual amount
• the decline in value of the luxury car, based on the applicable car limit, unless the car is allocated to the general small business pool.

You reduce both deductions to reflect any use of the car for a non-taxable purpose.

Where you allocated the car to the general small business pool with the cost based on the applicable car limit, see Calculating your depreciation deductions.

If you have included the lease expense at question P8 – label J Lease expenses in the Expenses section in your schedule, the amount should also form part of your expense reconciliation adjustments at question P8 – label H. Include the amount at row i on worksheet 4. Include the deduction for the accrual amount at row p.

If the lease terminates or is not extended or renewed and the lessee does not actually acquire the car from the lessor, the lessee is treated under the rules as disposing of the car by way of sale to the lessor. This constitutes a balancing adjustment event. If the car is not subject to the simplified depreciation rules, any assessable or deductible balancing adjustment amount for the lessee must be determined. If the car has been allocated to the lessee’s general small business pool, see step 4 for small business entities.

Hire-purchase agreements

Hire-purchase and instalment sale agreements of goods are treated as a sale of the property by the financier (or hire-purchase company) to the hirer (or instalment purchaser).

The sale is treated as being financed by a loan from the financier to the hirer at a sale price of either their agreed cost or value or the property’s arm’s length value.

The periodic hire-purchase (or instalment) payments are treated as payments of principal and interest under the notional loan. The interest component is deductible to the hirer, subject to any reduction required under the thin capitalisation rules. This amount forms part of the expense reconciliation adjustments at question P8 – label H. Include the amount at row t on worksheet 4.

In relation to the notional sale, the hirer of a depreciating asset is treated as the holder of the asset and either allocates the asset to the appropriate small business pool if they are a small business entity using the simplified depreciation rules for the income year, or may be entitled to claim a deduction for the decline in value of the depreciating asset. The cost of the asset for this purpose is taken to be the agreed cost or value, or the arm’s length value if the dealing is not at arm’s length.

If you have included hire-purchase charges as an expense at question P8, the amount should also form part of your expense reconciliation adjustments at question P8 – label H. Include the amount at row n on worksheet 4.

Termination of a limited recourse debt

Excessive deductions for capital allowances are included in assessable income under the limited recourse debt rules contained in Division 243 of the ITAA 1997. This will occur where:

• expenditure on property has been financed or re-financed wholly or partly by the limited recourse debt
• the limited recourse debt was terminated after 27 February 1998 but has not been paid in full by the debtor
• because the debt has not been paid in full, the capital allowance deductions allowed for the expenditure exceed the deductions that would be allowable if the unpaid amount of the debt was not counted as capital expenditure of the debtor. Special rules apply in working out whether the debt has been fully paid.

A limited recourse debt is a debt where the rights of the creditor as against the debtor, in the event of default in payment of the debt or of interest, are limited wholly or predominantly to the property which:

• has been financed by the debt or
• is security for the debt or rights in relation to such property.
• A debt is also a limited recourse debt if, notwithstanding that there may be no specific conditions to that effect, it is reasonable to conclude that the creditor’s rights as against the debtor’s are capable of being so limited.

A limited recourse debt includes a notional loan under a hire-purchase or instalment sale agreement of goods to which Division 240 of the ITAA 1997 applies, see section 243-20.

The amount that is included within assessable income as a result of these provisions forms part of your income reconciliation adjustments at question P8 – label X. Include the amount at row b on worksheet 4.

Small business skills and training boost

The small business skills and training boost provides a temporary bonus deduction to small businesses (with an aggregated annual turnover of less than $50 million) for expenditure incurred in providing eligible external training courses to employees by eligible registered training providers in Australia.

The bonus deduction is an additional tax deduction of 20%, on top of the ordinary deduction, for eligible expenditure incurred from 7:30 pm AEDT on 29 March 2022 to 30 June 2024.

For more information, see Small business skills and training boost.

You claim the bonus deduction as a Reconciliation item at Expense reconciliation adjustments question P8

Do not include here your ordinary deduction for expenditure on skills and training.

You also write the amount you claimed at Expense reconciliation adjustment question P8 for the skills and training boost at question P12.

Completing this question

Normal and late balancers

• If you incurred expenditure from 7:30 pm AEDT on 29 March 2022 and to the end of 2022–23, you claim the bonus deduction here.
• This means that you claim the bonus deduction for eligible expenditure incurred in both the 2021–22 income year and the 2022–23 income year in your 2022–23 tax return.

If you are an early balancer:

• lodging for 2022–23 income year, do not claim the bonus deduction
• lodging for 2023–24 income year, and
  • incurred expenditure from 7:30 pm AEDT on 29 March 2022 to the end of your 2022–23 income year, you claim the bonus deduction for that expenditure in 2023–24
  • incur expenditure in your 2023–24 income year, you claim the bonus deduction for that expenditure in 2023–24.
   
• lodging for 2024-25 income year
  • incur expenditure in your 2024–25 income year (up until 30 June 2024), you claim the bonus deduction for that expenditure in 2024–25.
   

Step 1 Show your bonus deduction for the small business skills and training boost for your primary production business at row x in worksheet 4 in the primary production column.

Step 2 Show your bonus deduction for the small business skills and training boost for your non-primary production business at row x in worksheet 4 in the non-primary production column.

Step 3 Add up your primary production and non-primary production at row x in worksheet 4.

Step 4 Transfer the amounts at row x in worksheet 4 to expense reconciliation adjustments question P08. Do not show cents. Also record this amount at question P12 – label M.

Small business technology investment boost

The small business technology investment boost provides a temporary bonus deduction to small businesses (with an aggregated annual turnover of less than $50 million) for eligible expenditure incurred, and depreciating assets acquired, for the purposes of their digital operations or digitising their operations.

The bonus deduction is an additional tax deduction of 20%, on top of the ordinary deduction, for eligible expenditure incurred from 7:30 pm AEDT on 29 March 2022 to 30 June 2023. It applies to the total of eligible expenditure of up to $100,000 per income year, up to a maximum bonus deduction of $20,000 per income year.

For more information, see Small business technology investment boost.

You claim the bonus deduction at Reconciliation items at Expense reconciliation adjustments question P8.

Do not include here your ordinary deduction for expenditure on technology investment.

You also write the amount you claimed at Expense reconciliation adjustment at question P8 for the technology investment bonus deduction at Small business boosts question P12.

Completing this question

Normal and late balancers

If you incurred expenditure from 7:30 pm AEDT on 29 March 2022 to the end of 2022–23, you claim the bonus deduction here.

This means that you claim the bonus deduction for eligible expenditure incurred in both the 2021–22 income year and the 2022–23 income year in your tax return 2023.

Early balancers

Lodging for 2022–23 income year: do not claim the bonus deduction

Lodging for 2023–24 income year:

• If you incurred expenditure from 7:30 pm AEDT on 29 March 2022 and by the end of 2022–23, you claim the bonus deduction for that expenditure in 2023–24 at this question.
• If you incur expenditure in 2023–24, you will claim the bonus deduction for that expenditure in 2023–24 at this question.

Step 1 Show your bonus deduction for the small business technology investment boost for your primary production business at row y in worksheet 4 in the primary production column.

Step 2 Show your bonus deduction for the small business technology investment boost for your non-primary production business at row y in worksheet 4 in the non-primary production column.

Step 3 Add up your primary production and non-primary production at row y in worksheet 4.

Step 4 Transfer the amounts at row y in worksheet 4 to expense reconciliation adjustments question P08. Do not show cents. Also record this amount at question P12 – label N.

Worksheet 4 – Reconciliation statement

Part 1a: Income reconciliation adjustments – Additions

Row	Calculation elements	Primary production	Non-primary production
a	Assessable balancing adjustment amounts on disposal of depreciating assets	$	$
b	Assessable business income not included in the profit and loss statement	$	$
c	Subtotal: add the amounts at row a and row b.	$	$

Part 1b: Income reconciliation adjustments – Subtractions

Row	Calculation elements	Primary production	Non-primary production
d	Net exempt income (gross exempt income less expenses relating to that exempt income)	$	$
e	Profit on sale of depreciating assets included in accounts	$	$
f	Other non-assessable income included in the profit and loss statement	$	$
g	Subtotal: add the amounts at rows d, e and f.	$	$
	Income reconciliation adjustments: take the amount at row g away from the amount at row c.	$	$

Part 2a: Expense reconciliation adjustments – Additions

Row	Calculation elements	Primary production	Non-primary production
h	Depreciation charged in accounts [see note 1]	$	$
i	Lease payments for luxury cars	$	$
j	Loss on sale of depreciating assets included in accounts	$	$
k	Part of prepaid expenses not deductible this year	$	$

Part 2b: Expense reconciliation adjustments – Items not allowable as deductions

Row	Calculation elements	Primary production	Non-primary production
l	Capital expenditure	$	$
m	Additions to provisions and reserves	$	$
n	Other non-deductible items, including income tax	$	$
o	Subtotal: add the amounts at rows h, i, j, k, l, m and n.	$	$

Part 2c: Expense reconciliation adjustments – Subtractions

Row	Calculation elements	Primary production	Non-primary production
p	Accrual amount deduction for lessee of luxury cars	$	$
q	Deductible balancing adjustment amounts on disposal of depreciating assets	$	$
r	Deduction for decline in value of depreciating assets	$	$
s	Part of prepaid expenses deductible in 2022–23 and not included elsewhere	$	$
x	Bonus deduction for small business skills and training boost	$	$
Y	Bonus deduction for small business technology investment boost	$	$
t	Other items deductible for tax purposes not included in the profit and loss statement [see note 4]	$	$
u	Subtotal: add the amounts at rows p, q, r, s, x, y and t.	$	$
-	Expense reconciliation adjustment: take the amount at row u away from the amount at row o.	$	$

Notes for parts 1a to 2c

1. Include amounts at row h only if you are not using the simplified depreciation rules. However, exclude any pool deductions which you have included at M question P8 – label M which relate to a continuing small business pool.
2. See Guide to depreciating assets 2023 for an explanation of depreciating assets.
3. If you have included an amount of capital expenditure incurred to terminate a lease or licence at question P8 – label J Lease expenses, make a reconciliation adjustment at label H Expense reconciliation adjustments by including the amount of capital expenditure as an expense add-back and taking away that part of the expense which is allowed as a tax deduction.
4. Do not include in the amount at row t 
   • section 40-880 deductions
   • business deductions for project pools
   • deductions for landcare operations, water facilities, fencing assets and fodder storage assets.
    

Completing this question

Step 1 Complete worksheet 4 using the explanations provided. This will give you your total income and expense reconciliation amounts (primary and non-primary production) that you need for your schedule.

Step 2 Transfer the totals in the Income reconciliation adjustments (below row g) and the Expense reconciliation adjustments (below row u) on the worksheet to the appropriate boxes on your schedule. Do not show cents.

Step 3 If a reconciliation adjustment amount is negative, print L in the box at the right of the amount.

Step 4 Add up your primary production and non-primary production income reconciliation adjustments and show the total at label X.

Step 5 Add up your primary production and non-primary production expense reconciliation adjustments and show the total at label H.

Step 6 If the total income reconciliation adjustment amount is negative, print L in the box at the right of the amount at label X. If the total expense reconciliation adjustment amount is negative, print L in the box at the right of label H.

Worksheet 5

Working out your net income or loss from primary production business for 2022–23

Row	Calculation elements	Amount
a	Your primary production total business income you show in the Primary production column at TOTAL BUSINESS INCOME question P8	$
b	Your primary production total business expenses you show at question P8 – label S	$
c	Total of the amounts of deductions for section 40-880 expenditure, project pool and landcare operations, water facilities, fencing assets and fodder storage assets	$
d	Add the amount at row b to the amount at row c.	$
e	Take the amount at row d away from the amount at row a.	$
f	Your primary production income reconciliation adjustment (if any)	$
g	Your primary production expense reconciliation adjustment (if any)	$
h	Your net income or loss from your primary production business: add the amounts at rows e, f and g.	$

If the amount at row d is more than the amount at row a, the amount at row e is a loss. If it is, or if you have a negative amount at rows f or g, the examples below will help you to work out your loss from primary production business.

Worksheet 6

Working out your net income or loss from non-primary production business for 2022–23

Row	Calculation elements	Amount
i	Your non-primary production total business income you show in the Non-primary production column at TOTAL BUSINESS INCOME question P8	$
j	Your non-primary production total business expenses you show at question P8 – label T	$
k	Total of the amounts of deductions for non-primary production section 40 - 880 expenditure, project pool and landcare operations	$
l	Add the amount at row j to the amount at row k.	$
m	Take away the amount at row l from the amount at row i.	$
n	Your non-primary production income reconciliation adjustment (if any)	$
o	Your non-primary production expense reconciliation adjustment (if any)	$
p	Your net income or loss from your non-primary production business: add the amounts at rows m, n and o.	$

If the amount at row l is more than the amount at row i, the amount at row m is a loss. If it is, or if you have a negative amount at rows n or o, the examples below will help you to work out your loss from non-primary production business.

Net income or loss from business for 2022–23

Use worksheet 5 and worksheet 6 to work out your net income or loss from your primary and non-primary production businesses for 2022–23. Do not include any non-commercial business loss deferred from a prior year.

Completing this question

Step 1 Transfer the amount at row h on worksheet 5 to question P8 – label B. Do not show cents. If the amount is a loss, print L in the box at the right of this amount.

Step 2 Transfer the amount at row p on worksheet 6 to question P8 – label C. Do not show cents. If the amount is a loss, print L in the box at the right of this amount.

Step 3 Add labels B and C and show the total in the adjacent Totals column. Do not include any non-commercial business losses deferred from a prior year (which are shown at label D or E, see Deferred non-commercial business losses from a prior year).

If you made a loss from your business, print L in the box at the right of this amount.

If the amount at label B or C includes details from more than one business activity, and any one of these activities resulted in a net loss, you need to complete questions P3 and P9 in your schedule.

Deferred non-commercial business losses from a prior year

Do you have any deferred non-commercial business losses from a prior year?

A deferred non-commercial business loss is a loss you incurred in a prior year which you were unable to claim against other income. If your activity was carried out partly in Australia and partly overseas contact us or see How to defer your losses.

No	Go to Net income or loss from business this year.
Yes	Read on.

You need to know

Your prior year deferred non-commercial business loss for a business activity may be reduced if you earned net exempt income in 2022–23.

If you became bankrupt (or received a relief from debt) the deferred losses will no longer be available. The loss cannot be deducted in 2022–23 or a future year.

For more information, see How to offset your losses

Completing this question

Step 1 At question P8 – label D in your schedule show the amount of primary production losses you deferred in a prior year from activities that are the same or similar to your 2022–23 activity. Do not show cents.

Step 2 At label E show the amount of non-primary production losses you deferred in a prior year from activities that are the same or similar to your 2022–23 activity. Do not show cents.

Step 3 Add up your primary and non-primary production deferred non-commercial business losses. Show the total at Deferred non-commercial business losses from a prior year in the Totals column.

Net income or loss from business

This amount takes into account non-commercial losses deferred from a prior year.

Completing this question

Step 1 If you have net income from primary production business in 2022–23 at label B, take away from it the amount of your deferred non-commercial primary production business losses from a prior year shown at label D, and:

• show the answer at question P8 – label Y Net income or loss from business
• if the amount at label Y is negative, print L in the box at the right of the amount.

If you have a loss from primary production business in 2022–23 at label B, add it to the amount of your deferred non-commercial primary production business losses from a prior year shown at label D, and:

• show the total at label Y Net income or loss from business question P8
• print L in the box at the right of the amount

If you have printed L in the box at the right of the amount at label Y, you also need to complete questions P3 and P9.

Step 2 If you have net income from non-primary production business in 2022–23 at label C, take away from it the amount of your deferred non-commercial non-primary production business losses from a prior year shown at label E, and:

• show the answer at question P8 – label Z Net income or loss from business
• if the amount at label Z is negative, print L in the box at the right of the amount.

If you have a loss from non-primary production business in 2022–23 at label C, add it to the amount of your deferred non-commercial non-primary production business losses from a prior year shown at label E, and:

• show the total at question P8 – label Z Net income or loss from business
• print L in the box at the right of the amount.

If you have printed L in the box at the right of the amount at label Z, you also need to complete questions P3 and P9.

Step 3 Add up the amounts at label Y and Z.

Show the answer at Net income or loss from business in the Totals column.

If the total is negative, print L in the box at the right of the amount.

Step 4 Transfer the amounts at Y and Z to B and C (respectively) question 15 in your supplementary tax return.

Small business income tax offset

Are you a small business entity with a turnover less than $5 million?

No	Go to P9 Business loss activity details.
Yes	Read on.

You need to work out your net small business income so we can calculate your small business income tax offset. The maximum offset is $1,000 per year per person from all your sources of small business income.

Your net small business income is your assessable income from carrying on your business less your deductions to the extent that they are attributable to that assessable income.

If you carry on multiple businesses, combine the profit or loss from each business activity to work out your net small business income from all your businesses. If one or more of your business activities made a loss, you must first apply the non-commercial loss rules to work out how each loss is to be treated. Any loss you are unable to claim because of these rules is not taken into account in working out net small business income.

For more information, see question P9 Business loss activity details.

Use your Y and Z amounts as your starting point for working out your net small business income. Prior year deferred non-commercial losses being claimed as a deduction in 2022–23 are already included in the amounts shown at labels Y and Z. You do not include them again in your net small business income calculation.

Do not include:

• any net capital gains you made from assets used in carrying on your business
• any personal services income unless you were a personal services business
• any of the following deductions
  • tax-related expenses
  • gifts or contributions
  • personal superannuation contributions
  • tax losses from prior years.
   

Completing this question

Step 1 Did you have either of the following:

• business income or deductions shown at questions other than question P8 – labels Y or Z (see Worksheet 7 for a list of these question)
• business losses that are not deductible under the non-commercial loss rules – see question P9 Business loss activity details.

To work out your net small business income, use the worksheet or our Small business income tax offset calculator.

No	The amounts at question P8 – labels Y and Z are your net small business income. Add labels Y and Z together, a negative amount will offset a positive amount. Show the total at question 15 – label A in your supplementary tax return. You are finished with this question. Go to question P9 Business loss activity details.
Yes	Go to step 2.

Step 2 Use the worksheet below to adjust your question P8 – label Y and Z amounts. Show these amounts at rows a and b in the worksheet.

Step 3 If any business losses are not allowable deductions for non-commercial loss purposes show them at row h. If the loss includes a net capital gain, deduct the amount of net capital gain from the loss and show the result at row h.

Step 4 Add up all the amounts at rows a to h and deduct the amount at rows i and j. Show the result at row k. If the result is positive this is your net small business income. Show this amount at question 15 – label A in your supplementary tax return. If the result is a loss show zero. Do not show cents.

Worksheet 7

Worksheet 7a – Question 15 Net income or loss from business

Row	Calculation elements	Amount
a	B primary production If this amount is negative show it in brackets, for example (5,000).	$
b	C non-primary production If this amount is negative show it in brackets, for example (5,000).	$

Worksheet 7b – Additions

Row	Calculation elements	Amount
c	FMD withdrawals at question 17 relating to the business	$
d	Foreign source business income from question 19 or 20	$
e	Business interest income (do not include interest on an FMD as it is not business interest income)	$
f	Business dividend income	$
g	Other business income not already shown at this question	$
h	Business losses which are not allowable deductions (excluding any net capital gains)	$

Worksheet 7c – Deductions

Row	Calculation elements	Amount
i	FMD deductible deposits at question 17 relating to the business	$
j	Other business deductions not already claimed at this question	$

Worksheet 7d – Net small business income (including foreign income)

Row	Calculation elements	Amount
k	Add up all the amounts at rows a to h in Worksheets 7a and 7b. Then deduct the amounts at row i and j in Worksheet 7c. Show the result at row k.	$

Continue to: P9 Business loss activity details