Small Business Tax Concessions Now Open to More Businesses

The Government and Senate reached a consensus on Friday 31 March 2017, to pass tax reductions for certain companies and broaden access to tax concessions previously only provided to businesses with a turnover under $2M.

These changes come into force for the current 2017 financial year and may assist any decisions you make and their tax impact.


Small Business Tax Concessions Extended

The Legislation allows small businesses, with aggregated turnover of less than $10M, to access most small business tax concessions. The current $2M threshold is retained for access to the Small Business Capital Gains Tax Concessions.


Key features of the new law apply to Small Business Entities with aggregated turnover of less than $10M and include the following small business tax concessions:

  • Immediate deductibility for small business start-up expenses;
  • Simpler depreciation rules, the ability to “Pool” assets to accelerate depreciation and immediate write off for assets acquired under $20,000 (net of GST)
  • Simplified trading stock rules
  • Roll-over for restructures of small businesses
  • Deductions available for prepayments of certain business expenses e.g. overhead operating costs
  • Accounting for Goods and Services Tax (GST) on a cash basis
  • Annual apportionment of input tax credits for acquisitions and importations that are partly creditable
  • Paying GST by quarterly instalments


Small Business Income Tax Offset Adjusted

The Legislation increases the small business income tax offset for eligible individuals from 5% to 8% that relates to their total net small business income. This rate of offset, which is a non-refundable offset, will be applied for the 2017 to 2024 financial years. The maximum benefit of the offset to individuals has been retained at $1,000. This offset provides benefits for individuals in business, partners in trading partnerships and beneficiaries of trading trusts and is limited to those enterprises with an aggregated turnover of less than $5M during the 2017 financial year.


Reduction of Company Income Tax  to 27.5%

This was a contentious issue in the Legislation with effect in the 2017 financial year. The reduction in this year is only available to a small business entity, i.e. a trading company with an aggregated turnover less than $10M. The concession to the lower tax rate does not apply to non-trading or purely investment companies.

For 2018 and subsequent years there is a new description applied to a second group of companies, i.e. Base Rate Entities and the 27.5% tax rate will be applied to companies with a aggregated turnover of less than $25M.

These changes are a major bonus for businesses in the $2M to $10M turnover range and will provide opportunities for significant tax savings for the current and future financial years.

Contact your Accountant at Powers to find out what these changes mean for you.