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KiraA(Newbie)Newbie
21 June 2023

I work a job where I receive a salary. I also operate a small business as a sole trader. My business is not yet generating any income, and I am in a deficit/loss.

If I earn 50.000 in a year but my business has a loss of 20.000, would I only need to pay income tax on 30.000?


What about if you plan to invest 50% of all your salary income into your sole tradership? Do I still have to pay full income tax on my salary, and then use the already-taxed money to buy equipment for my small business? or can I avoid having to pay income tax on that half?

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499 views
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Most helpful reply

AriATO(Community Support)Community Support
26 June 2023

Hi @KiraA


Your business loss doesn't automatically reduce your other income. You have to see if you meet the requirements to offset your salary against your business loss under non-commercial losses. If you can offset your business loss then yes, you'll pay income tax on $30,000.


If you plan to invest 50% of your salary into your business, it doesn't mean you'll only pay tax on half your gross salary. If you buy things for your business you'll work out if the expense is an eligible business deduction. This is deducted against your business income and not your employment income. If your business makes a loss that you can't offset you can carry it forward to use in future years.

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Most helpful reply

AriATO(Community Support)Community Support
26 June 2023

Hi @KiraA


Your business loss doesn't automatically reduce your other income. You have to see if you meet the requirements to offset your salary against your business loss under non-commercial losses. If you can offset your business loss then yes, you'll pay income tax on $30,000.


If you plan to invest 50% of your salary into your business, it doesn't mean you'll only pay tax on half your gross salary. If you buy things for your business you'll work out if the expense is an eligible business deduction. This is deducted against your business income and not your employment income. If your business makes a loss that you can't offset you can carry it forward to use in future years.

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Offset sole tradership losses in salaried income taxes? | ATO Community