1. Small Business Entities
Chapter 7
Small Business Entities
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2. 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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3. 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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4. 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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5. 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
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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 $1,000 or less.
Simplified Depreciation
– Pooling of Assets
Post 31 December 2013
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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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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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