Small Business Entity Concessions
Small businesses with an annual turnover of less than $10 million may qualify for a range of tax concessions (although the threshold may be lower based on the concession). If your business is eligible you can use the concessions that suit you. For certain concessions, the threshold has been increased from $10 million to $50 million. You may have to satisfy additional conditions and will need to check whether you qualify for the concessions each tax year.
Eligible businesses can use the concessions outlined in the table.
*CGT 15-year asset exemption - If you are 55 or older and retiring and your business has owned an asset for at least 15 years, you won't pay capital gains tax when you sell the asset.
*CGT 50% active asset reduction - If you have owned an asset to conduct your business, you will only pay tax on 50% of the capital gain when you sell the asset. For individuals (including partners in partnerships and beneficiaries of trusts), this reduction applies in addition to the standard* 50% CGT discount, thereby reducing the taxable amount to 25% of the capital gain.
For foreign or temporary residents, a reduced CGT discount between 0-50% applies depending on individual circumstances.
*CGT retirement exemption - There is CGT exemption on the sale of a business asset (up to a lifetime limit of $500,000). If you are under 55, money from the sale of the asset must be paid into a complying superannuation fund, or retirement savings account.
*CGT rollover - If you sell a small business asset and buy a replacement, you can roll over your CGT liability to the value of the replacement asset. This means you won't pay any CGT owing until you sell the replacement asset.
******Simpler depreciation rules
You can usually pool your assets to make depreciation calculations easier.
You can also immediately write-off – deduct the full cost in the year you buy them – most depreciating assets that cost less than a certain limit.
The limits are:
From 1 July 2011 to 30 June 2012 $1,000
From 1 July 2012 to 31 December 2013 $6,500
From 1 January 2014 to 7.30 pm on 12 May 2015 $1,000
From 7.30 pm on 12 May 2015 to 28 January 2019 $20,000
From 29 January 2019 to 7.30 pm on 2 April 2019 $25,000
From 7.30 pm on 2 April 2019 to 11 March 2020 $30,000
From 12 March 2020 to 31 December 2020 $150,000
*****Simpler trading stock rules - If the value of your trading stock has not increased or decreased by more than $5,000 over the year, you can choose whether or not to do an end-of-year stock take.
***Immediate deduction for certain prepaid business expenses - You can claim an immediate deduction for prepaid business expenses if the payment covers a period of 12 months or less and ends in the following income year.
***Immediate deduction for certain business start-up expenses - You can claim an immediate deduction for certain business start-up expenses, such as professional expenses and legal and accounting advice.
*****Two-year amendment period - The time limit for the Commissioner or the taxpayer to amend an income tax assessment of an individual or small business is two years, instead of the standard four years.
*****Accounting for GST on a cash basis - You don't need to account for GST on a sale you make until you receive payment for the sale. Equally, input tax credits for purchases can only be claimed when you have paid for the purchase.
Annual apportionment of GST input tax credits - If you purchase items you use partly for private purposes, you can claim full GST credits for these on your activity statements. You can then make a single adjustment to account for the private use percentage at the end of the year.
Paying GST by instalments - You can pay GST by instalments the ATO calculates for you and can vary this amount each quarter if required.
****FBT car parking exemption - In some cases you may be exempt from FBT for employee car parking.
****FBT exemption - Multiple work-related portable electronic devices (eg laptop computers) provided to your employees are exempt from FBT.
*****PAYG instalments based on GDP amount - To save you working out your instalments based on actual income each quarter, all individuals and small business entities can pay fixed quarterly instalment amounts as calculated by the ATO based on their business and investment income in their most recently assessed tax return.
Lower company tax rate - Base rate entities pay company tax at 26% rather than 30%. The 26% rate will reduce to 25% by 2020-22.
**Small business income tax offset - Individuals who receive business income other than via a company are entitled to a tax offset.
* The annual turnover threshold for the CGT concession is $2 million.
** The annual turnover threshold for the small business income tax offset is $5 million
*** The annual turnover threshold for these expenses increases to $50 million from 1 July 2020
**** The annual turnover threshold for these concession increases to $50 million from 1 April 2021
***** The annual turnover threshold for these expenses increases to $50 million from 1 July 2021
****** Please note that the turnover test from the instant asset write-off has changed over time. For more details, see here.
MORE: For more information, see the Small business entity concessions essentials section of the ATO web site.