From 1 July 2016 Small Businesses generally are those with aggregated turnover of less than $10 million.
For the purposes of the small business income tax offset the turnover ceiling is $5 million.
Up to 30 June 2016 the small business turnover limit for all purposes was $2 million. This threshold ($2 million) has been retained in respect to the small business CGT concessions.
Details of amending legislation are here: Treasury Laws Amendment (Enterprise Tax Plan) Bill 2016
“Aggregated turnover” is the result of adding together the annual turnovers of connected or related entities (s 328-115). Turnover generated between the aggregated entities is not counted.
Entities whose turnovers are required to be aggregated for this test include related group companies, section 318 associates (relatives, business partners and their spouses and children, associated companies and trusts), and affiliates – individuals or companies acting in “accordance with your directions or wishes, or in concert with you” (s 328-130).
A number of Small Businesses depreciation and other tax concessions were introduced or expanded through implementation of the 2015 Federal Budget.
Eligibility: The small business turnover test
The aggregated turnover test ceiling of $2 million was replaced by a ceiling of $10 million from 1 July 2016.
The turnover test is determined year by year, and is met if:
- actual aggregated turnover was less than $10 million in the previous or current income years, or
- is estimated to be less than $10 million in the current year (provided it was less than $10 million for one of the two previous income years).
Small Business Depreciation
Small businesses have access to simplified depreciation rules.
- Immediate deduction for most depreciating “low cost assets” costing less than $1,000 or up to $1,000 of second element costs. (This value limit was increased to $20,000 from 12 May 2015 and has since been extended to 30 June 2018). The 2018 Budget contains a proposal to further extend the measure until 30 June 2019.
- higher cost assets can be added to a general pool and depreciated at the rate of 15% diminishing value in the first year and 30% thereafter
- If the value of a small business entity’s general small business pool is less than $1,000 ($20,000) at the end of the income year, the small business entity can claim a deduction for the entire value of the pool.
- Motor vehicles are subject to the same rules as other depreciating assets.
For the treatment of the sale of pooled assets – see ATO – balancing adjustments
Accelerated instant asset write-off concessions applicable from 1 July 2012 to 31 December 2013.
Small business entities can claim a deduction up to $6,500 for the value of a depreciating asset in the income year the asset is first used or installed ready for use, or for a second element cost for installation or first use in a previous income year.
Depreciating assets that cost $6,500 or more are allocated to the general small business pool and with a deduction for the depreciation at a rate of 15 per cent in the year of allocation, and a rate of 30 per cent in subsequent income years.
If the value of a small business entity’s general small business pool is less than $6,500 at the end of the income year, the small business entity can claim a deduction for the entire value of the pool.
Special rules apply to motor vehicles. A small business entity can deduct the first $5,000 of the cost of a motor vehicle, plus 15 per cent of any remaining cost, in the income year that it is first used or installed ready for use. The motor vehicle is then added to the small business entity’s general small business pool, and depreciated as part of the pool at a rate of 30 per cent in subsequent income years.
From 1 January 2014 the write-off threshold reverts to $1,000 and the special rules for motor vehicles no longer apply. However (see above) the introduction of a $20,000 threshold from 12 May 2015 until 30 June 2017.
Other small business concessions
Small businesses can access a range of other specific tax concessions. They include:
- Simplified trading stock valuation rules – a stocktake and accounting for the difference is not required if the year’s opening and closing stock difference is (or estimated to be) less than $5,000. More on stocktakes here.
- Prepayments – immediate deduction where the payment is for a period of service that is 12 months or less and ends in the next income year
- CGT concessions – there are four main CGT concessions available
- The Budget 2015 proposal to extend rollover relief to changes in the legal structure of a small business from 1 July 2016 is now law, see guidance document LCG 2016/3 and also more here.
- FBT – car parking fringe benefits
- GST – cash basis accounting, paying by pre-set (capable of variation) instalments with annual return, annual apportionment of private portions,
- PAYG – payment by pre-set (capable of variation) instalments
- Excise – monthly reporting and payment
- Fuel tax credits – simplified claims and record-keeping methods available to businesses claiming less than $10,000 in fuel tax credits each year – see more here
Shorter amendment period: For individuals and small business entities, the time limit for reviewing an assessment is generally two years notice of assessment issue date. For other taxpayers, the period is four years.
Superannuation Clearing House (“SBSCH”): Small businesses which come under the Small Business Entity turnover threshold (currently $10 million) or with less than 20 employees can access the Superannuation Clearing House facility operated by the Tax Office. See Superannuation Clearing House
- Company Tax Rates
- ATO – Simplified depreciation
- ATO – Small Business Entity Concessions
- ATO – new legislation – accelerated depreciation
- ATO – Concessions at a glance
This page was last modified 2018-05-22