Show download pdf controls
  • Work out if you're a small business for the income year

    There are three methods to work out if you are a small business for the current income year. If you satisfy any of the methods you are a small business.

    1. Use your previous year's turnover – most businesses find this the easiest
    2. Estimate your current year turnover
    3. Use your actual current year turnover

    You must use the same method for any connected or affiliated business, and keep records of how you worked out your turnover.

    You need to be aware that:

    • some exceptions and limitations apply if you use methods 2 or 3
    • even if you are a small business for the current income year, you might not be eligible for all of the small business concessions.

    See also:

    Method 1 – Use your previous year's turnover

    You are a small business for the current income year if your previous year's turnover is less than $10 million.

    If you are completing a tax return for 2015–16 or an earlier income year, your previous year's turnover must be less than $2 million.

    Method 2 – Estimate your current year turnover

    You are a small business for the current income year if your estimated turnover is less than $10 million. You can only use this method if your turnover was less than $10 million for one of the last two income years.

    You must work out whether your turnover is more likely than not to be less than $10 million, based on the conditions you know about at the beginning of the income year. If you are starting a business, base your estimated turnover on the conditions you know about at the time you start your business.

    Factors to consider when estimating your turnover include:

    • your turnover in previous income years
    • if you plan to reduce or increase staff in the current income year
    • whether your business operating hours will increase or decrease
    • if previous extraordinary sales or product lines will be available in the current income year
    • whether your business will face increased competition in the current income year
    • whether your business activity will increase or decrease because of changing conditions.

    2015–16 and earlier income years

    If you are completing a tax return for 2015–16 or an earlier income year, and you're using this method, your estimated turnover for that year, as well as one of the two previous income years, must be less than $2 million.

    Method 3 – Use your actual current income year turnover

    If your actual turnover at the end of the current year is less than $10 million, you are a small business for the current income year.

    If you are completing a tax return for 2015–16 or an earlier income year, and you're using this method, your estimated turnover for that year must be less than $2 million.

    If you use your actual turnover, you cannot use the goods and services tax (GST) and pay as you go (PAYG) instalments concessions for that income year. This is because you must choose these concessions earlier in the income year.

    Example: A business operating for part of an income year

    Rosa has a business and plans to retire in March 2018. She decides to gradually ease out of the business and doesn't take on any new clients after March 2017.

    Rosa's turnover for both the 2015–16 and 2016–17 income years was more than $10 million, so she cannot use Method 2. To be an eligible small business for the 2017–18 income year, Rosa must use her actual current year turnover.

    When Rosa finished her business in March 2018, her turnover for the income year to date was $8.1 million. Rosa is a small business for 2017–18 because she estimates that her turnover would have been $8.5 million for the full income year.

    As a small business, Rosa can access some of the small business concessions.

    End of example

    If you are winding up a business

    In a year when you are winding up a business, you will be taken to be still running the business and have access to these concessions if both of the following apply:

    • you are winding up a business you previously carried on
    • you were a small business in the income year you ceased business.

    If you are not a small business in an income year

    If you are not a small business in an income year, you may still be able to access the:

    FBT exemption for work-related devices

    You are a small business for the FBT work-related portable electronic device exemption if you are a small business for at least one income year that ends or starts in the relevant FBT year.

    Example: Is an employer a small business for an FBT year?

    Dimitris is a sole trader who has a surveying business and employs a number of staff. In the 2017–18 income year, his business had a turnover of $3.7 million. He's estimating that his turnover is going to be $12 million for the 2018–19 income year due to two large contracts he negotiated.

    Dimitris wants to know if, as an employer, he can access the FBT exemption for portable electronic devices in the 2018–19 FBT year (1 April 2018 to 31 March 2019).

    To determine this, Dimitris looks at whether his business is a small business for at least one income year that ends or starts in the 2018–19 FBT year.

    Dimitris determines his business is a small business for 2017–18 income year because his turnover is less than $10 million. Therefore his business can access the FBT exemption for portable electronic devices in the 2018–19 FBT year – from 1 April 2018 to 31 March 2019.

    End of example

    See also:

    Last modified: 25 Jun 2018QC 50223