Entrepreneurs tax offset

Introduction

The entrepreneurs tax offset (ETO) is a tax offset equal to 25% of the income tax payable on your business income if you have an aggregated turnover of $50,000 or less.

If your aggregated turnover is more than $50,000, the ETO is phased out so that the tax offset stops once your turnover reaches $75,000.

From 2009-10 if you are an individual you must meet an additional income test. Broadly, the new income test applies if you are a small business sole trader, a partner in small business partnership, or a beneficiary of a trust that is a small business. The new income test reduces the ETO entitlement for:

• individuals who are single with income for ETO purposes over $70,000
• individuals with a family whose income for ETO purposes is over $120,000.

The ETO can only reduce the amount of tax you must pay each year. That is, we cannot:

• refund any unused tax offset
• defer it to reduce your tax in a later income year, or
• transfer it to another taxpayer to reduce their tax.

For more information, refer to Subdivision 61-J (section 61-500 - section 61-525) of the Income Tax Assessment Act 1997 (ITAA 1997).

When we say 'business' we mean the individual, partnership, company or trust that carries on the business activity. When we say 'small business' we mean 'small business entity', which is an individual, partnership, trust or company with an aggregated turnover less than $2 million.