Did you know there are several tax concessions available for small businesses in Australia? Here’s what you need to know.

Define the beast

In Australia small businesses total around 2.4 million in number, supply nearly 5 million jobs and account for more than 40% of our GDP (gross domestic product). It’s appropriate then that the Government sees fit to provide some taxation assistance to this engine-room powerhouse of the Australian economy.

A sole trader, partnership, company, or trust with an aggregate annual turnover of less than $10 million is defined by the ATO as a small business.

The word aggregate is important. It means that any businesses that are connected, or in which you are involved, are included. Sorry, but that means you can’t have three separate $9 million businesses and still take advantage of the small business taxation concessions.

Lesser limits of $5 million and $2 million apply to income tax offsets, and capital gains tax (CGT) concessions, respectively.

What’s available?

  • Start-up expenses – immediate deductions for certain professional start-up costs.
  • Lower corporate tax rates.
  • Immediate deduction for some prepaid expenses.
  • GST – account for GST on a cash basis, and pay by instalments.
  • GST – claim full GST input tax credits for items purchased and partly used for private purposes.
  • Simplified depreciation rules including complete first year write-off for some assets.
  • Trading stock – a much simpler valuation system.
  • FBT (Fringe Benefits tax) – exemption from paying FBT for many work devices, and for provision of employee car space.
  • Employee superannuation – simplified method of payment to a central small business superannuation Clearing House, which then distributes to individual employee super accounts.
  • PAYG – an option to submit employee tax by instalments.
  • CGT restructure rollover relief – a two year deferral period when a business is sold with the intention of acquiring a replacement asset. CGT will be payable on eventual disposal of the replacement asset.
  • CGT – other exemptions:
    • 15 year exemption – complete exemption where a business has operated for 15 years
    • Greater asset reduction effectively giving 75% reduction in gross capital gain
    • Retirement exemption – In certain circumstances, reduction of CGT up to the $500k lifetime limit.

This list provides a headline of possible concessions. Your experienced taxation lawyer can assist with full explanations of the requirements.

While not an exclusive concession to small business, the Government also provides a range of assistance measures to businesses engaging apprentices.

COVID-19 continues to test the mettle of all Australians, and the Government has provided assorted assistance measures in various domains, including for small businesses. Our thoughts go out to those thousands of small business owners who are struggling with these extremely demanding circumstances.

As with many areas of business and law, preparation and organisation are crucial. Having a totally organised set of books is a great start prior to sitting down with a highly experienced taxation lawyer.

The benefits may well exceed your expectations.

So, are you taking advantage of all the small business tax concessions available to your business?