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  Home >  Tax Information - Individuals/Businesses > Can an individual business owner pay less tax by electing Personal Assessment

Can an individual business owner pay less tax by electing Personal Assessment

Example 1 (pay less tax by electing Personal Assessment)

Peter, single, had assessable profits from his sole-proprietorship business amounting to $300,000 for the year of assessment 2024/25. During the year, Peter acquired a property used as his dwelling. Interest paid up to 31 March 2025, on a loan from a bank secured over a mortgage of his dwelling amounted to $60,000.
         
Personal Assessment not elected
$     
  Assessable Profits 300,000
  Tax thereon (at standard rate 15%) 45,000
  Less : 100 % tax reduction (capped at $1,500) (Note) 1,500
  Tax Payable 43,500
 

Personal Assessment elected
$      $     
  Assessable Profits 300,000
  Less : Home Loan Interest 60,000  
  Basic Allowance 132,000 192,000
  Net Chargeable Income 108,000
  First $50,000 @ 2%   1,000
  Next $50,000 @ 6%   3,000
  Remainder $8,000 @ 10%   800
  Tax thereon (at progressive rates) 4,800
  Less : 100 % tax reduction (capped at $1,500) (Note) 1,500
  Tax Payable 3,300
 
If Peter elects Personal Assessment he can claim deductions for home loan interest and personal allowance and get total tax savings of $40,200.
 
Example 2 (election for Personal Assessment may not be advantageous)

John, single, had assessable profits from his sole-proprietorship business amounting to $280,000 for the year of assessment 2024/25. For this year he also received salaries income of $360,000 from an employment.
 

Personal Assessment not elected
$     
  Assessable Profits 280,000
  Tax thereon (at standard rate 15%) 42,000
  Less : 100 % tax reduction (capped at $1,500) (Note) 1,500
  Tax Payable 40,500
 
  Salaries Income 360,000
  Less : Basic Allowance 132,000
  Net Chargeable Income 228,000
  First $50,000 @ 2%   1,000
  Next $50,000 @ 6%   3,000
  Next $50,000 @ 10%   5,000
Next $50,000 @ 14% 7,000
  Remainder $28,000 @ 17%   4,760
  Tax thereon (at progressive rates) 20,760
  Less : 100 % tax reduction (capped at $1,500) (Note) 1,500
  Tax Payable 19,260
  Total Tax Payable (i.e. $40,500 + $19,260) 59,760
 

Personal Assessment elected
  $     
  Assessable Profits 280,000
  Salaries Income 360,000
  Total Assessable Income 640,000
  Less : Basic Allowance 132,000
  Net Chargeable Income 508,000
  First $50,000 @ 2%   1,000
  Next $50,000 @ 6%   3,000
  Next $50,000 @ 10%   5,000
Next $50,000 @ 14% 7,000
  Remainder $308,000 @ 17%   52,360
  Tax thereon (at progressive rates) 68,360
  Less : 100 % tax reduction (capped at $1,500) (Note) 1,500
  Tax Payable 66,860
 

John has to pay $7,100 (i.e. $66,860 - $59,760) more if he elects for Personal Assessment. This is because under Personal Assessment, tax is calculated at progressive tax rates on the aggregated income from all sources. As the marginal scale of the progressive rates is 17%, which is higher than the standard rate of 15%, it may not be advantageous for taxpayers with large amount of income to elect for Personal Assessment.

Note : For 2024/25, 100% of the final tax payable under profits tax, salaries tax and tax under personal assessment would be waived, subject to a ceiling of $1,500 per case.

 

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