The ordinary income referred to the income earned in the normal course of activities from the transactions carried out on a business. But selling fixed assets does not come under the category ordinary income.
In the given case, Nick is a small business entity who sells pool equipment and materials, and offers servicing to swimming pools. Nick operates his own business selling as well as Nick comes under the small business entity as his turnover is less than $2 million. In other words, it is concluded that he is conducting sole proprietorship.
Small business entities have certain concessions on income tax, capital gains tax, goods and services tax and Fringe benefit tax. They can have PAYG (pay as you go) instalment concessions as well (ATO, 2013).
A sole trader is the simplest business structure. It is very easy and inexpensive to set up because there are very few legal and tax formalities. If a person operates his/her own business as a sole trader, then he/she can run his/her own trade and control it completely. He/she will be completely responsible legally for every aspect of the business. The debts or losses in the business cannot be shared with anyone and the owner would be legally responsible for them (ATO, 2013).
By knowing the key feature of the sole trade business model, one can be really sure whether it suits one or not. In this business model, the income generated from the business is treated as personal income and the owner is solely responsible for any kinds of taxes the business will have to pay. After deducting any expenses, the owner must include the income of the business in his/her personal tax returns.