Generally a business that is considered a small business entity has access to certain tax concessions. You would be considered a small business entity if you are a sole trader, partnership, company or trust that:
- Carries on a business and
- Has an aggregated turnover of less than $10 million.
So, if this is you, please keep reading!
Following are the kinds of concessions that you could be eligible for.
Simplified Depreciation Rules – Instant Asset Write Off
In May 2015, the government increased the instant asset write off threshold to $20,000. The use of this threshold has been extended to 30 June 2019.
Any asset that is over this threshold will be added to the business’ general small business pool and deducted over time. If the balance of the general pool is $20,000 or less, then the balance of the pool can then be completely written off.
From 1 July 2019, the instant asset write off threshold reduces back to $1,000.
Simplified Depreciation Rules – Accelerated Depreciation for Primary Producers
If you are a primary producer there are accelerated depreciation rules that can apply to your industry-specific assets. These will be discussed further in an upcoming February blog.
Lower Company Tax Rate Changes
If you are a company, you may be eligible for a lower company tax rate of 27.5% if you are considered a base rate entity. To be a base rate entity, both of the following must apply:
- Turnover must be less than $25 million for the 2018 financial year (increased to $50 million for the 2019 financial year)
- 80% or less of the entity’s assessable income is base rate entity passive income (e.g. interest, dividends, rent, royalties & net capital gains)
The lower company tax rate will reduce further for base rate entities to 26% in the 2021 financial year and again down to 25% for the 2022 financial year.
You can visit the ATO website for further information on the above.
Small Business Income Tax Offset
You can claim the small business income tax offset if you are a small business sole trader or have a share of net small business from a partnership or trust. The offset is equal to 8% with a limit of $1,000 each year and applies to small business with turnover of less than $5 million.
Capital Gains Concessions
If you are selling an active asset used in a small business then you can potentially disregard or defer some or all of a capital gain from an active asset used in a small business. Per the ATO, these CGT concessions include:
- 15 year exemption: disregard capital gain if you have owned the asset for 15 years and you’re aged 55 and retiring
- 50% active asset reduction: reduces capital gain on active asset by 50%
- Retirement exemption: capital gain from sale of active assets exempt up to the lifetime limit of $500,000. If you are under 55, the exempt amount must be paid into a complying superfund
- Rollover: if you sell an active asset, you can defer all of part of a capital gain for 2 years or longer if you acquire a replacement asset.
For more information on other concessions that might apply to you as a small business, it will assist you to view the snapshot on the ATO website and seek advice from our skilled business advisory team!
Ensure you are maximising the potential of your small business, particularly prior to 30 June 2019, by getting in touch with BLG Business Advisers online or by calling (02) 4229 2211.