1. Prepare Tax Documentation for Individuals
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2. Small Business Entities
Chapter 7
Small Business Entities
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3. 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.
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4. 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
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5. 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.
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6. 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 less than $20,000 each. .
Simplified Depreciation
– Pooling of Assets
From 12 May 2015
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7. 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.
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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.
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9. Tax Cuts for Small Business
If a small business has a turnover of less than $2 million per year, the following tax breaks apply:
1.5% tax cut for companies
If the business is a company, there is a tax cut of 1.5% from 1 July The new company tax rate will be 28.5%.
5% tax discount for unincorporated businesses
If the business is not a company, there is a tax discount of 5% from 1 July This means the amount of tax that needs to be paid on business income will be reduced by 5%, capped at $1,000 each year.
The discount will be delivered as a tax offset.
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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.
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