Business tax CBE

oli
oli Registered Posts: 88 Regular contributor ⭐
Hi there,

Just went through the business tax exam and it says in the answers that Zhang's salary is not an allowable expense and is added back, why is this? I thought that salaries were an allowable expense? By the looks of things it doesn't say what he does so is that a clue? Its the one part of that question that I really don't understand.

Any help would be much appreciated

Comments

  • Paisley
    Paisley Registered Posts: 93 Regular contributor ⭐
    oli wrote: »
    Hi there,

    Just went through the business tax exam and it says in the answers that Zhang's salary is not an allowable expense and is added back, why is this? I thought that salaries were an allowable expense? By the looks of things it doesn't say what he does so is that a clue? Its the one part of that question that I really don't understand.

    Any help would be much appreciated

    Hi Oli

    The CBA doesn't give enough detail about the business, but the same question is in the Osborne workbook practice assessment 2, page 66. Here it says that Zhang is a sole trader, therefore his 'salary' would be drawings and he could choose how much or little he was going to draw from the business. If it was an allowable expense it would change his tax liability. Hope that helps.
  • Nikdoug
    Nikdoug Registered Posts: 69 Regular contributor ⭐
    Sole traders cannot take a salary through the payroll.
  • Monsoon
    Monsoon Registered Posts: 4,071 Beyond epic contributor 🧙‍♂️
    Agreed.

    Sole traders are taxed on profits. Any 'salaries' paid to themselves are in fact drawings and do not affect tax.
Privacy Policy