Small Business Entities Chapter 7 Small Business Entities © National Core Accounting Publications

Small Business Entities (SBE) An entity will be classified as a “small business entity” if it: carries on a business, and satisfies a $2 million aggregated turnover test A SBE may be an individual, company, partnership or trust. © National Core Accounting Publications

Small Business Entities (SBE) Aggregated turnover test Aggregated turnover refers to annual gross income or proceeds excluding GST. It includes: Trading stock sales Fees charged for services provided Interest from business bank accounts, and, Any payments received to replace lost earnings © National Core Accounting Publications

Small Business Entities Concessions An entity which satisfies the small business entity test can choose to access various concessions. These include: Simplified depreciation rules Simplified trading stock rules Accounting for GST on a cash basis and paying GST by quarterly instalments Various Capital Gains tax concessions A small business entity can choose whether or not to access any one or more of these concessions. © National Core Accounting Publications

Simplified Depreciation Allocation of assets to a general small business pool written off at 15% in the year of acquisition and 30% thereafter. Immediate write-off of assets costing $6,500 or less. Immediate write-off of the first $5,000 of a motor vehicle costing $6,500 or more. Simplified Depreciation – Pooling of Assets Pre 1 January 2014 © National Core Accounting Publications

Simplified Depreciation Allocation of assets to a general small business pool written off at 15% in the year of acquisition and 30% thereafter. Immediate write-off of assets costing $1,000 or less. Simplified Depreciation – Pooling of Assets Post 31 December 2013 © National Core Accounting Publications

Simplified Trading Stock Rules Where the difference in opening and closing balances of trading stock is $5,000 or less, an SBE taxpayer can choose not to: • Account for the change in value. • Value each item of trading stock on hand at the end of the year of income. © National Core Accounting Publications

© National Core Accounting Publications CGT Concessions There are four CGT concessions specifically for small business entities. These are covered in Advanced Income Tax Law Chapter 18: Capital Gains – Special Topics. © National Core Accounting Publications

© National Core Accounting Publications Prepaid Expenses A prepaid expense is expenditure for things to be done (in whole or in part) in a later income year. Generally, a prepaid expense is immediately deductible to an SBE taxpayer if: the payment is made for a period of service of 12 months or less, and, the period of service ends no later than the last day of the next income year. © National Core Accounting Publications