Concessions for small business entities

From 1 July 2007, small businesses with an annual turnover less than $2 million are called small business entities and may qualify for a range of tax concessions.

Eligible businesses can choose to use the concessions which suit their business although they may have to satisfy additional conditions. They will have to check if they qualify for the concessions each tax year.

Some of these concessions were previously only available to businesses in the simplified tax system. The simplified tax system no longer operates, however all of its concessions remain available to eligible businesses.

What are the concessions?

Capital gains tax (CGT) 15 year asset exemption

If you are aged 55 or older, retiring and your business has owned an asset for at least 15 years you won’t pay CGT when you sell the asset.

CGT 50 per cent active asset reduction

If you’ve owned an asset to conduct your business (an ‘active asset’) you’ll only pay tax on 50% of the capital gain when you sell the asset.

CGT retirement exemption

There is CGT exemption on the sale of a business asset, up to a lifetime limit of $500,000. If you are under 55, money from the sale of the asset must be paid into a complying superannuation fund or approved deposit fund or a retirement savings account.

CGT roll-over

If you sell a small business asset and buy a replacement, you can roll over your CGT liability to the value of the replacement asset. This means you won’t pay any CGT owing until you sell the replacement asset.

Simpler depreciation rules

Generally, you can pool your assets to make depreciation calculations easier and also claim an immediate deduction for most assets costing less than $1,000.

Simpler trading stock rules

You can choose whether or not to do an end-of-year stock take if the value of your trading stock has not increased or decreased by more than $5,000 over the year.

Immediate deduction for certain prepaid business expenses

You can claim an immediate deduction for prepaid business expenses where the payment covers a period of 12 months or less that ends in the next income year.

Entrepreneurs’ tax offset (ETO)

The entrepreneurs’ tax offset may reduce your tax payable by up to 25% where your business has turnover less than $75,000.

Accounting for goods and services tax (GST) on a cash basis

You are not required to account for the GST on a sale you make until you receive payment for the sale.

Annual apportionment of GST input tax credits

If you purchase items that you use partly for private purposes, you can choose to claim full GST credits for these items on your activity statements, and then make a single adjustment to account for the private use percentage at the end of the year.

Paying GST by instalments

You can pay GST by instalments worked out for you by the Tax Office. You can vary this amount each quarter if you choose.

Fringe benefits tax (FBT) car parking exemption

In some cases you may be exempt from FBT for employee car parking.

If you consider any of the above concessions are relevant to your business, please contact this office.