If you are in business then chances are, you are eligible for a range of tax concessions. Whilst concessions are based on your aggregated turnover, a business with less than 5 million turnover may be eligible for concessions that you haven't yet considered. To fully understand additional eligibility requirements and applied dates (dates may vary for each concession) please contact your Tax Agent or accountant for endorsed advice. This is general advice only
Here are just a few small business tax concessions to think about :
Simplified depreciation Rules instant asset Write off
Eligible businesses can claim an immediate deduction for the business portion of the cost of an asset in the year that the asset is first used or installed ready for use. If you are a small business, you will need to apply the simplified depreciation rules in order to claim an instant asset write off. It cannot be used for assets that are excluded from those rules.
Recent Changes: For assets first used or installed ready for use between 12 March 2020 until 30 June 2021, and purchased by 31 December 2020, the instant asset write-off:
threshold amount for each asset is $150,000 (up from $30,000)
Certain Start-up business expenses immediately deductible
Expenditure may be fully deductible in the income year incurred if it relates to a small business that is proposed to be carried on and
The expense incurred is :
in obtaining professional advice (advice must be relative and includes the viability of the proposed business and the development of a business plan) or services relating to the proposed structure or the proposed operation of the business (It does not include the cost of acquiring assets that may be used by the business) or
in payment to an Australian government agency of a fee, tax or charge relating to setting up the business or establishing its operating structure and
the income year in which the deduction is claimed, the entity that incurred the expenditure
is a small business entity or
does not carry on a business and does not control or is controlled by an entity carrying on a business in that income year that is not a small business entity in that income year.
Immediate deductions for prepaid expenses
You can claim an immediate deduction for prepaid expenses where the payment covers a period of 12 months or less, that ends in the next income tax year.
Lower company tax rate changes
If you are a base rate entity, then your company tax for the 2019-20 income year will be 27.5%, changing to 26% for the 2020-21 income year and 25% for the 2021-22 income year.
What is a base rate entity?
A base rate entity is a company that meets both of the following criteria
- Has an aggregated turnover less than the aggregated turnover threshold. (which is $50 million for the 2018-19 income year)
- 80% or less of their assessable income is base rate entity passive income.
Small Business Income Tax Offset
The small business income tax offset can reduce the tax you pay by up to $1,000 year year.
The offset is worked out on the proportion of tax payable on your business income. Whilst the maximum offset has not changed between 2016 - 2022, the rate of offset is slowly increasing.
To be eligible, you must be carrying on a small business as sole trader, or have a share of net small business income from a partnership or trust.
Simplified trading stock rules
If your turnover is less than 50 million, this concession allows the small business to estimate the value of trading stock at the of the financial year to report in the tax return. Whilst you would still need to record how you estimated it, you can choose not to conduct a full stock take (and account for changes in the value of your trading stock) if the difference is equal to or less than $5,000
Capital Gains Tax (CGT) 50 % asset reduction
If you don't qualify for the small business 15 year exemption, the small business 50% active asset reduction may apply to reduce the capital gain.
* But, unlike the other small business concessions, the small business 50% active asset reduction applies automatically if the conditions are satisfied, unless you choose for it not to apply
This is important, as you might prefer, and perhaps a company or trust may make larger tax-free payments under the small business retirement exemption, so do get advice on this.
There are a number of eligibility steps to ascertain if this concession applies, so get in touch with your tax professional for further advice. read more...
FBT Exemptions
FBT Car parking Exemption
If you are a small business employer, car parking benefits you provide are exempt from FBT if :
the parking is not provided in a commercial car park
you are not a government body, a listed public company, or a subsidiary of a listed public company
for the last income year before the relevant FBT year – either
your gross total income was less than $10 million
your turnover was less than $10 million (or $50 million from 1 April 2021).
FBT work related devices exemption
From 1 April 2016, small businesses can provide their employees with multiple work-related portable electronic devices that have substantially identical functions in the same FBT year, and all the devices will be exempt from FBT. This applies to devices that are primarily used for work, such as laptops, tablets, calculators, GPS navigation receivers and mobile phones.
From 1 April 2021, the turnover threshold to determine if you can access this exemption increases to $50 million for an income year that ends or starts in the relevant FBT year.
For more information on tax concessions and eligible deductions, or if you're simply looking to switch accountants, give us a call today.
This articles intention is to inform rather than advise and is based on legislation at the time. Each Taxpayer’s circumstances vary so we strongly recommend that you discuss this information with your Tax Agent, Accountant or Bas Agent before implementation. If you take, or do not take action as a result of reading this article, we accept no responsibility for any financial loss incurred.