Being a small business can be difficult, but the Australian Taxation Office has provided several concessions which are available only to small businesses.
A small business is any business with a turnover of less than $10m. Once you are classed as a small business you can access the following concessions;
Immediate write-off of Assets costing less than $20,000. There is no depreciation for these assets as the cost is a deduction, in full, in the year the assets is purchased. Currently this concession is due to wind up at 30 June 2019.
Accelerated depreciation for other assets. Assets purchased which are greater than $20,000, will need to be depreciated. No matter when during the year the asset was purchased you get to use 15% depreciation rate for the first year. Every year after the first year, you can use 30% depreciation rate.
Immediate Deduction for Pre-paid Expenses. Need something for your business and it comes on sale. You can buy it in bulk and claim it all as a deduction even though you won’t use it all in the same tax year. Examples include Bulk Fuel, Stationery, Rent, etc.
Lower Company Tax Rate. If you haven’t heard, there is a huge debate in the parliament now about what tax rate to make large companies pay. This does not affect small businesses as that legislation has already passed and the current company tax rate is 27.5% (compared to 30% payable by other companies). The rate is meant to eventually drop to 25% over the next 10 years.
Small Business Tax Offset. The company rate is great if you are a company but what if you trade as a sole trader or in a partnership. There is a $1,000 Small Business Offset for individuals which effectively reduces the tax a small operator pays on their profit by $1,000. This offset is only available on turnovers of less than $5m.
Accounting for GST on a Cash Basis. You have made a sale but are still waiting to be paid. If you were not a small business, you would have to pay the GST on this transaction to the ATO before you have been paid. However, as a small business you have the option of only paying the GST to the ATO when you receive it, assisting with your cashflow needs.
Capital Gains Tax Concessions. If you use an asset in your business and sell it for a profit you may be able to utilise the Small Business Capital Gains Tax Concessions to reduce the tax payable on the sale, possibly to zero if the right conditions are met. Such assets include Land & Building, water entitlements, proceeds on the sale of your business, even the shares in the company which runs your business. You may also be able to use the proceeds to help fund your retirement by contributing the profit to a superannuation fund.
Stubbs Wallace (taking care of Business since 1897). There are a number of other small business concessions which are available and our team are happy to discuss how any of the small business concessions, or any other tax provision, can best be used to ensure your small business thrives.