Claiming the small business income tax offset
The small business income tax offset can help your small business clients reduce the tax they pay on business income by up to $1,000, as shown in the table below.
Table: Progressive changes to the small business income tax offset
Income year
|
Aggregated turnover threshold
|
Rate of offset
|
Maximum offset
|
2015–16
|
$2 million
|
5%
|
$1,000
|
2016–17 to 2019–20
|
$5 million
|
8%
|
$1,000
|
2020–21
|
$5 million
|
13%
|
$1,000
|
2021–22
|
$5 million
|
16%
|
$1,000
|
We have identified some common errors when reporting client income to claim the offset. Use the following tips to avoid these errors:
Completing Item 13
Include net income derived by the small business partnership or trust at either item 13D or 13E, not at 15A.
The amounts to include at item 13D or 13E are the:
- share of net small business income from a small business partnership (in which they are a partner)
- share of net small business income from a small business trust (in which they are a beneficiary).
Reduce the amounts at these items by any related deductions, such as:
- landcare operations
- decline in value for water facilities
- prior year deferred non-commercial losses of partners claimed this year.
We use these labels to calculate the offset and they are not counted towards your client's taxable income. This means you must also include a distribution from a partnership or a share of net income from a trust at the relevant item – 13N, 13L, 13O or 13U.
Completing Item 15A
Don't include the following types of income at item 15A, as they are not eligible for the offset:
- Personal services income – this is reported at item 14A (however income from carrying on a personal services business is included at item 15A)
- Salary, wages or directors fees
- Dividend income of directors.
Also, don't include any share of net small business income from partnerships and trusts at item 15A. This is reported at item 13D or 13E.
Completing all relevant fields
Enter your client's net small business income from sole trading activities at item 15A so we can calculate their offset. This item does not contribute towards their taxable income. This means you must include sole trader business income at item 15A, as well as at:
- P8 – Business income and expenses
- 15B or 15C – Net income or loss from business.
Including net income not gross income
Include your client's:
- net small business income at item 15A for sole traders
- share of net small business income at item 13D or 13E for partnerships and trusts.
Don't use their gross income.
See also:
We've identified some common errors when reporting net small business income to claim the small business income tax offset. Find out how you can avoid these errors.