What is the threshold to be able to access the various Small Business Tax Concessions?

 

Since 1 July 2016 the tax concessions and reliefs available to small business entities have increased. The thing you will notice about the concessions is that the thresholds, that you need to be below to be to be able to access them, are different for each type of concession. This can be very confusing remembering which threshold was relevant to which concession. Below we have provided a summary of each small business concession and the threshold that you will need to be below to be able to access it.

 

Income threshold (aggregated turnover test)  Concessions/benefits
$25m

 

($50m from 30 June 2019)

This threshold applies to a company entity only and it effectively reduces the income tax rate and franking credit rate  down to 27.5% for the income year ended 30 June 2017 and 30 June 2018.

The income tax rate will progressively reduce to 25% by 30 June 2027.

$10m  

Simple depreciation rules including:

  • Immediate deduction in the first year for depreciable assets costs less than $20,000 (GST exclusive);
  • Places other depreciable assets into either a 15% or 30% general business pool.

Prepaid expenses – immediate deduction for expenses paid in advance for up to 12 months (i.e. insurance, rent and subscriptions).

Start-up or formation costs – immediate deduction in the first year for these costs (i.e. legal and accountancy fees).

GST – Access to cash accounting for GST and payment of GST using the GST instalment method.

FBT exemption – can exempt car parking benefit to staff if used within the office premises.

Small Business restructure rollover relief – allows for small businesses to genuinely restructure the business without any capital gains tax consequences at the time of restructure.

 

$5m  

Small Business tax offset – this is a non-refundable tax offset available to individuals carrying on a small business as a sole trader or beneficiary, or partners of a small business entity.

The current tax offset rate is 8% (capping at $1,000 for each individual).

$2m  

Small Business CGT Concessions including:

  • 15 year tax-free concession
  • Active asset 50% reduction
  • Retirement exemption ($500,000 lifetime cap)
  • Small business rollover

These concessions are very complicated and have other conditions you need to satisfy to be able to access them.

Should you have any questions or would like to know more about the above tax concessions please do not hesitate to contact us.