There’s more than you think – Tax Concessions for small businesses
There’s more than you think – Tax Concessions for small businesses

At Maddern Accountants, it’s safe to say that we L-O-V-E small business. From micro businesses and soloprenuers, to established small to mid sized companies turning over 7 figures per year, our passions rest in seeing small businesses work hard for their owners.

We constantly see research which illustrates the impacts and benefits small business has on our economy. It is estimated that in Australia, small business employment accounts for more than half of all private sector jobs. A pretty impressive fact for a country that considers  mining/resources, finance and education to be it’s most important income producer.

Given the importance of small business within our economy, the Fed has granted special tax concessions for small business on a variety of tax matters, including:

-Simplified Depreciation: where small business can immediately write-off assets that cost less than $20,000 until 30 June 2017, and depreciate assets that are equal to or greater than $20,000 in a depreciation pool at a rate of 30% (15% in the first year).

-Trading Stock:If your trading stock has not changed in value over the income year (either up or down) by more than $5,000, you may elect not to do an end-of-year stock take.

-Car Parking and FBT exemption: Small business employers that offer car parking benefits to employees are exempt from FBT, if they can satisfy certain criteria, namely the parking is not in a commercial car park, you aren’t  a government body or a publicly listed company  (or subsidiary), and you were a small business entity for the last income year before the last relevant FBT year, or your total income was less than $10 million.

-GST instalments:  If you meet the definitions below of a small business and are usual cash basis accounting, you are only required to account for GST once payment is received. You can also pay your GST in quarterly instalments and the tax office will calculate how much these are.

Capital Gains Tax relief: There are four special CGT concessional that may be available to small business, to fully disregard or reduce capital gains from the disposal of assets.

-Prepaid Expenses: Small business is entitled to an immediate tax deduction for certain pre-paid business expenses. If a payment relates to an expense that is referable in the next financial year, you can claim that deduction in the current income year.

In Australia, a small business is recognised as such when its annual income turnover is less than $2 million, and it is said to be carrying on a business activity. Our tax laws stipulate that this turnover is aggregated, which means the turnover of each connected entity must be included. Certain amounts are to be included or excluded in this definition, but they are too complex an issue to go through in this post. We can help here if you would like further information on these small business tax concessions or visit the ATO’s small business website here.

Disclaimer: The information on this site is of a general nature only. It does not take your specific needs or circumstances into consideration. You should look at your own personal situation and requirements before making any financial decisions.

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