Concessions
As a small business you can access a range of concessions. There are different eligibility requirements for some of the concessions below.
Income tax concessions
As a small business, you may be eligible for the following income tax concessions.
Temporary full expensing
You can immediately deduct the business portion of the cost of eligible new or second-hand depreciating assets. These assets must be first held and first used or installed ready for use for a taxable purpose, between 7.30pm (AEDT) on 6 October 2020 and 30 June 2022.
You can also immediately deduct the business portion of the cost of improvements made to eligible depreciating assets if those costs are incurred between 7.30pm (AEDT) on 6 October 2020 and 30 June 2022.
You also deduct the balance of your small business pool at the end of an income year ending between 6 October 2020 and 30 June 2022.
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Simpler depreciation rules – instant asset write-off
If temporary full expensing doesn't apply, you can claim an immediate deduction for the business portion of the cost of each eligible new or second-hand depreciating asset. The cost of each eligible asset must be less than the threshold applicable to the date range that the asset was first used or installed ready for use:
- $150,000, from 12 March 2020 to 30 June 2021 and purchased between 7.30pm (AEST) on 1 May 2015 and 31 December 2020
- $30,000, from 7.30pm (AEDT) on 2 April 2019 to 11 March 2020
- $25,000, from 29 January 2019 to prior to 7.30pm (AEDT) on 2 April 2019
- $20,000, before 29 January 2019.
See also:
Backing business investment – accelerated depreciation
For the 2019–20 and 2020–21 income years, you can claim accelerated depreciation deductions for eligible new assets if they are first held on or after 12 May 2020, and first used or installed ready for use for a taxable purpose between 12 March 2020 and 30 June 2021.
If you are using the small business simplified depreciation rules, you can claim 57.5% of the business portion of the cost of the asset (for those assets that cost more than the instant asset write-off threshold) in the first year you add the asset to the small business pool.
If you are not using the simplified depreciation rules, you can claim a deduction of 50% of the cost or opening adjustable value of an eligible asset on first use or installation. Existing depreciation rules apply to the balance of the asset’s cost.
You cannot claim a backing business investment – accelerated depreciation deduction if the business is eligible and applies temporary full expensing or instant asset write-off to the same asset.
See also:
Lower company tax rates
From the 2017–18 income year, you may be eligible for a lower company tax rate if you are a base rate entity.
A company is a base rate entity if:
- their turnover is less than the turnover threshold –$25 million for the 2017–18 income year and $50 million from the 2018–19 income year
- 80% or less of their assessable income is base rate entity passive income (such as interest, dividends, rent, or a net capital gain).
The lower company tax rate is
- 27.5% for the 2017–18 to 2019–20 income years
- 26% for the 2020–21 income year
- 25% from the 2021–22 income year.
When working out the rate to use when franking your distributions, you need to assume that your turnover, assessable income and base rate passive income will be the same as the previous income year.
If you were a small business in previous years, you may have also been eligible for the lower company tax rate, which was:
- 27.5% for the 2016–17 income year – the maximum franking credit allocated to a frankable distribution was determined by your corporate tax rate for imputation purposes.
- 28.5% for the 2015–16 income year – the maximum franking credit allocated to a frankable distribution was 30%.
See also:
Increased small business income tax offset
You can claim a tax offset on the tax payable on your net small business income as a sole trader, and your share of net small business income from a partnership or trust.
If you are a small business with a turnover less than $5 million, the tax offset is:
- 8% up to $1,000 for the 2016–17 to 2019–20 income years
- 13% up to $1,000 for the 2020–21 income year
- 16% up to $1,000 for the 2021–22 income year onwards.
For the 2015–16 income year, if you were a small business with a turnover less than $2 million, the tax offset was 5% up to $1,000.
We work out your offset based on amounts you show in your income tax return.
See also:
Accelerated depreciation for primary producers
If you're a primary producer:
- from 12 May 2015 – you can immediately deduct the costs of fencing and water facilities
- from 19 August 2018 – you can immediately deduct the cost of fodder storage assets.
Deductions for professional expenses for start-ups
From 1 July 2015, you can deduct certain costs when starting up a small business. These costs include professional, legal and accounting advice and government fees and charges.
Small business restructure rollover
From 1 July 2016, you can change the legal structure of your business without incurring any income tax liability when active assets (CGT assets, trading stock, revenue assets and depreciating assets) are transferred by one entity to another.
Simplified trading stock rules
You can choose whether or not to do an end-of-year stock take if the value of your trading stock has not increased or decreased by more than $5,000 over the year.
Immediate deductions for prepaid expenses
You can claim an immediate deduction for prepaid business expenses where the payment covers a period of 12 months or less that ends in the next income year.
Two-year amendment period
You generally have a two-year time limit (from the day we issued your notice of assessment) for reviewing an assessment.
CGT concessions
As a small business, you may be eligible for the following capital gains tax (CGT) concessions:
- if your turnover is less than $2 million
- on assets used to conduct your business. We call these 'active assets'.
15-year exemption
If you are 55 years old or older, retiring or permanently incapacitated and your business has owned an asset for at least 15 years, you won’t pay CGT when you sell the asset.
50% active asset reduction
If you have owned an active asset you’ll only pay tax on 50% of the capital gain when you dispose of the asset.
Retirement exemption
Capital gains from the sale of active assets are exempt up to a lifetime limit of $500,000. If you're under 55 years old, the exempt amount must be paid into a complying super fund or a retirement savings account.
Rollover
If you dispose of an active asset and buy a replacement asset or improve an existing one, you can defer your capital gain until a later year.
GST and excise concessions
As a small business, you may be eligible for GST and excise concessions.
The turnover threshold for these concessions is:
- $10 million from 1 July 2016
- $2 million up to 30 June 2016.
Accounting for GST on a cash basis
You are not required to account for the GST on a sale you make until you receive payment for the sale.
Paying GST by instalments
You can pay GST by instalments we work out for you and you can vary this amount each quarter if you choose. Contact us to find out if you are eligible.
Annual apportionment of GST input tax credits
You can claim full GST credits on your activity statements for items you purchase and use partly for private purposes. You then make a single adjustment for the private use percentage at the end of the year.
Excise concession
You can apply to defer settlement of your excise duty and excise equivalent customs duty from a weekly to a monthly reporting cycle. To do this, apply in writing to vary your periodic settlement permission (PSP).
FBT concessions
As a small business, you may be eligible for fringe benefits tax (FBT) concessions.
The turnover threshold for these concessions is:
- $10 million from 1 April 2017
- $2 million up to 31 March 2017.
FBT car parking exemption
In some cases you may be exempt from FBT for employee car parking.
FBT work-related devices exemption
From 1 April 2016, if you provide employees with one or more work-related portable electronic devices in the same FBT year – such as laptops, tablets, calculators, GPS navigation receivers and mobile phones – all of the devices provided are exempt from FBT.
PAYG instalment concession
As a small business, you can pay PAYG by instalments using an amount we work for out for you. If required, you can vary this amount each quarter. To choose this option, complete the details under option 1 on your first activity statement or instalment notice for the year. Once chosen, it applies for the whole income year.
The turnover threshold for this concession is:
- $10 million from 1 July 2016
- $2 million up to 30 June 2016.
Super concessions
As a small business, you may be eligible for the following super concessions.
Superannuation clearing house
The Small Business Superannuation Clearing House helps you pay super guarantee contributions for all your employees in a single electronic payment.
You can access this service if you have fewer than 19 employees or a turnover under $10 million.
Contributions to your super fund
You may be able to contribute amounts from the CGT 15-year asset exemption and CGT retirement exemption to your super fund without affecting your non-concessional contributions limits.
The turnover threshold for this concession is $2 million as it relates to CGT concessions (this threshold has not changed).
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