Tax Laws Amendment (Small Business Measures No. 3) Act 2015 (114 of 2015)

Schedule 1   Tax discount for unincorporated small businesses

Part 1   Main amendments

Income Tax Assessment Act 1997

1   At the end of Division 328

Add:

Subdivision 328-F - Small business income tax offset

Guide to Subdivision 328-F

328-350 What this Subdivision is about

You may be entitled to a tax offset if you are an individual:

(a) who is a small business entity; or

(b) whose assessable income includes a share of the net income of an unincorporated small business entity.

Table of sections

Operative provisions

328-355 Entitlement to the small business income tax offset

328-360 Amount of your tax offset

328-365 Net small business income

328-370 Relevant attributable deductions

328-375 Modification if you are under 18 years old

Operative provisions

328-355 Entitlement to the small business income tax offset

You are entitled to a *tax offset for an income year if you are an individual:

(a) who is a *small business entity for the income year; or

(b) whose assessable income for the income year includes a share of the *net income, for the income year, of a small business entity that is not a *corporate tax entity.

Note: This section does not apply to an individual in his or her capacity as the trustee of a trust (see subsection 960-100(4)).

328-360 Amount of your tax offset

(1) The amount of your *tax offset is equal to 5% of the following:

328-360 (formula)

where:

your total net small business income for the income year means so much of the sum of the following as does not exceed your taxable income for the income year:

(a) your *net small business income for the income year, if you are a *small business entity for the income year;

(b) your share of a small business entity's net small business income for the income year that is included in your assessable income for the income year, less your deductions to the extent that they are attributable to that share and covered by section 328-370.

For the purposes of paragraph (b), disregard small business entities that are *corporate tax entities.

Note: If you are under 18 years old, your total net small business income will probably be worked out under section 328-375.

(2) However, the amount of your *tax offset is $1,000 if the amount worked out under subsection (1) exceeds $1,000.

Note: Your tax offset is capped at $1,000 regardless of the number of small business entities that cause you to be entitled to the tax offset for the income year.

328-365 Net small business income

(1) A *small business entity's net small business income for an income year is the result of:

(a) working out the entity's assessable income for the income year to the extent that it relates to the entity carrying on a *business, but disregarding:

(i) any *net capital gain; and

(ii) any *personal services income not produced from conducting a *personal services business; and

(b) subtracting the entity's deductions to the extent that they are attributable to that assessable income and covered by section 328-370.

(2) However, the entity's net small business income for the income year is zero if that result is less than zero.

328-370 Relevant attributable deductions

For the purposes of this Subdivision, this section covers all attributable deductions other than any under:

(a) section 25-5 (about tax-related expenses); or

(b) Division 30 (about gifts or contributions); or

(c) Subdivision 290-C (about personal superannuation contributions).

328-375 Modification if you are under 18 years old

(1) Despite subsection 328-360(1), your total net small business income for the income year is worked out under this section if you are a prescribed person (within the meaning of section 102AC of the Income Tax Assessment Act 1936) for the income year.

(2) Your total net small business income for the income year is the result of:

(a) working out your business income (within the meaning of subsection 102AE(5) of that Act) for the income year to the extent that it relates to you carrying on:

(i) a *business as a *small business entity for the income year; or

(ii) a business as a partner in a partnership, if the partnership is a small business entity for the income year; and

(b) subtracting your deductions, and each partnership's deductions, to the extent that they are attributable to that business income and covered by section 328-370.

(3) However, your total net small business income for the income year is:

(a) zero if that result is less than zero; or

(b) equal to your taxable income for the income year if that result exceeds that taxable income.