Small business owners need all the breaks that they can get. And that includes small business tax concessions – tax breaks.
So here is some valuable information about the Small business tax concessions that became available from 1 July 2015.
No one wants to pay more than their fair share of tax. So as a small business owner you need to be aware that these concessions exist.
Small Business Tax Concessions
Broadly speaking you will be eligible for the small business concessions if you have an aggregated annual turnover of less than $2million.
Instant Asset Write Off
The clock is ticking on this one, it runs out on 30 June 2017.
The instant write off is available to eligible small business entities that have bought new or second hand business assets that cost less than $20,000.
The deduction is available to all entity types (companies, trusts, partnerships and sole traders). Itneeds to be claimed through the tax return in the year the asset was first used or installed.
Company Tax Discount
Those eligible businesses operating through a company structure need to make sure the discounted tax rate of 28.5% is applied in their tax return.
Example: ABC Pty Ltd is an eligible small business entity. It has a taxable profit of $50,000 for the 2016 year.
Without the small business tax concessions their company tax payable would be $50,000 x 30% = $15,000.
With the small business tax discount their company tax payable would be $50,000 x 28.5% = $14,250.
The small business tax discount saves ABC Pty Ltd $750.
Individual Tax Offset
For those eligible businesses not operating through a company structure the small business income tax offset can reduce your personal tax payable by up to $1,000 each year. It is claimed in the form of a 5% tax offset on net small business income reported in your personal tax return.
It is available to individuals who are:
- a sole trader small business entity;
- a partner in a small business entity partnership;
- a direct beneficiary of a small business entity trust.
Example: Jack is an eligible small business sole trader. He has non-business income of $40,000 and net small business income of $60,000 for the 2016 year.
Claiming the small business tax offset will reduce Jack’s tax payable for the year by $748.
It should also be noted that both the small business company tax discount and small business tax offset were proposed to be increased in the 2017 year. The legislation had not been passed at the time of writing.
Other Small Business Concessions
In addition to these small business tax concessions, it’s also worth noting that there are other concessions available to small business I haven’t covered here such as:
- Small business restructures tax rollover;
- Accelerated depreciation for primary producers;
- Professional expense deductions for start-ups;
- FBT on work related devices.
For more information or specific accounting advice, please contact Mick at Ignition Accountants to see if you are eligible for any of the above concessions and how much they can save you.
1300 66 30 20
Legislation has passed the senate this week that will see companies with an aggregated turnover of less than $10 million eligible for the new reduced small business company tax rate of 27.5% in the 2017 financial year.
The legislation also contains an increase in the small business tax offset to 8% in the 2017 financial year for eligible business not operating through a company structure with an aggregated turnover of less than $5million. However, the offset remains capped at $1,000.
This information was correct at time of writing. Please check with Mick for the latest updates on the actual numbers.
This information should not be considered as professional advice, and you should check with Mick or another registered accountant to confirm your position.