You are a small business entity if you carry on a business and your business turnover (‘aggregated turnover’) is less than $2 million. There are three ways you can satisfy the $2 million aggregated turnover requirement for the current year. You can use:
- your aggregated turnover for the previous income year
- an estimate of your aggregated turnover for the current income year (worked out as at the first day of the income year), or
- your actual aggregated turnover for the current income year (worked out as at the end of the current income year).
You can only use the second method to estimate your turnover if your aggregated turnover for one of the previous two income years was 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 affiliates of yours at any time during the income year.
Simplified trading stock
Small business entities only need to conduct stocktakes and account for changes in the value of trading stock in limited circumstances (see Stock on hand).
Simplified depreciation rules
If you are an eligible small business entity, you may choose to calculate deductions for your depreciating assets using these rules.
Under the small business entity depreciation rules, the taxable purpose proportion (which includes the proportion the asset is used in your income-earning activities) of the adjustable value and some other costs (see description below under Depreciating assets generally), of most:
- depreciating assets costing less than $20,000 each (excluding input tax credit entitlements), first acquired after 7.30pm on 12 May 2015 and first used or installed ready for use between 7.30pm on 12 May 2015 and 30 June 2017, can be written off immediately
- other depreciating assets are pooled in a general small business pool and deducted at the rate of 30%
- newly acquired assets are deducted at 15% (half the pool rate) in the first year, regardless of when they were acquired during the year.
The balance of the general small business pool is also immediately deducted if the balance is less than $20,000 at the end of an income year that ends on or after 12 May 2015 and on or before 30 June 2017.
If you cease to be a small business entity or choose to stop using the simplified depreciation rules, the rules continue to apply to assets in the general small business pool for the 2015 and later income years. Depreciating assets you start to use, or start to have installed ready for use, cannot be added to the general small business pool until an income year in which you are a small business entity or choose to use the simplified depreciation rules.
A small business entity can choose to claim deductions under either the simplified depreciation rules or the uniform capital allowance (UCA) rules for certain depreciating assets used in the course of carrying on a business of primary production. The choice is available for water facilities, fencing assets, fodder storage assets and depreciating assets relating to landcare operations, electricity connections and telephone lines. Once you have made the choice, it cannot be changed.
For horticultural plants (including grapevines) you must use the UCA provisions.
Small business entities can also claim an immediate deduction for certain prepaid expenses.