• Concessions for small business entities

    Attention

    Warning:

    This information may not apply to the current year. Check the content carefully to ensure it is applicable to your circumstances.

    End of attention

    Did you carry on a business at any time during the year and have an aggregated turnover of less than $2 million or are you a former simplified tax system (STS) taxpayer?

    No

    Go to P1 Personal services income (PSI).

    Yes

    Read on if you want to find out more about concessions for small business entities.

    You need to know

    Small businesses with an aggregated turnover of less than $2 million are called 'small business entities' and may qualify for a range of tax concessions.

    Eligible businesses can choose to use the concessions that best suit their needs. It is not necessary to elect to be a small business entity each year in order to access the concessions. Nonetheless, businesses must review their eligibility each year.

    The simplified tax system no longer operates. However, all of its concessions remain available to eligible businesses.

    A small business entity may be eligible for the following concessions:

    Eligibility

    You are a small business entity if you are carrying on a business and have an aggregated turnover of less than $2 million.

    Aggregated turnover is your annual turnover plus the annual turnovers of any entities that are connected with you or that are your affiliates (adjusted to ignore dealings between connected entities and affiliates). Using aggregated turnover prevents larger businesses from structuring or restructuring their affairs to take advantage of the small business entity concessions.

    You must review your eligibility each year.

    For more information on the aggregation rules, read What are the aggregation rules? or phone the Business Infoline.

    Calculating your turnover

    Turnover includes all ordinary income earned in the ordinary course of business for the income year. The following are some examples of amounts included and not included in ordinary income.

    Table: Calculating your turnover

    Include these amounts

    Do not include these amounts

    • sales of trading stock
    • fees for services provided
    • interest from business bank accounts
    • amounts received to replace something that would have had the character of business income, for example, a payment for loss of earnings
     
    • GST charged on a transaction
    • amounts borrowed for the business
    • proceeds from the sale of business assets
    • capital gains
    • amounts received from repayments of farm management deposits
     

    There are special rules for calculating your annual turnover if you have retail fuel sales or business dealings with associates.

    The business operated for only part of the year

    If you carried on a business for only part of the income year, your turnover is worked out using a reasonable estimate of what the turnover would have been if you had carried on the business for the whole of the income year. This includes winding up the business.

    Satisfying the aggregated turnover threshold

    Your business satisfies the $2 million aggregated turnover requirement if you meet one of the following:

    • Your aggregated turnover for the previous income year was less than $2 million.
    • You estimate at the beginning of the current income year that your aggregated turnover for the year will be less than $2 million (and your aggregated turnover in each of the previous two income years was not more than $2 million).
    • Your actual aggregated turnover, worked out at the end of the income year, was less than $2 million. You rely on this test only if you do not satisfy either of the other two tests above. If you satisfy this test only, you cannot use the GST and PAYG concessions for the income year.

    For more information about these small business entity concessions, see Guide to concessions for small business entities (NAT 71874).

    Last modified: 25 Oct 2011QC 27987