Assessing income and assets from profit sharing 108-04040000

This document outlines profit sharing and the assessment of income and assets from this source. Profit sharing arrangements often occur in high income seasonal industries such as cray fishing, pearling and prawn fishing.

Profit sharing arrangement

Some workers undertake employment on a profit sharing arrangement. Rather than receiving a wage or contract to provide their services for an agreed price, the remuneration received is based on a proportion of the overall profit earned from the activity undertaken. Generally, payment is made as a lump sum after the completion of work.

The nature of the employment relationship applicable to customers involved in these arrangements more closely resembles that of an employee than a person who is a self employed contractor or involved in a business or partnership.

The amounts earned by a customer involved in a profit sharing arrangement are regarded as remunerative lump sums. Accordingly, the gross income received by a customer from a profit sharing arrangement is assessable under the general meaning of ordinary income and the provisions of permissible reductions of business income do not apply.

Lump sum received after claiming pension or benefit

If a customer receives a lump sum amount from a profit sharing arrangement after claiming a pension or benefit payment, or while current on a pension or benefit payment, the lump sum amount is assessed as income for 52 weeks from the date the customer is entitled to receive the amount.

Lump sum received prior to claiming pension or benefit

If a customer receives a lump sum amount from a profit sharing arrangement before claiming a pension or benefit payment, the lump sum amount is not treated as income. However, it may be used to calculate a seasonal work preclusion period for customers claiming a benefit payment.

Customers must also advise what they have done with any lump sum amounts so that, where appropriate, bank accounts and/or other asset items and amounts can be updated.

Related links

Employment income

Treatment of lump sums

Seasonal work preclusion period (SWPP)

Recording and correcting employment income details