Changes to small business concession thresholds

As of the 1st of July 2017, several of the small business concession thresholds that allow small businesses access to a range of concessions have increased, allowing more businesses to take advantage of various small business tax concessions.

The turnover threshold level used to determine whether you are considered to be a small business entity has increased from $2 million to $10 million for the 2017 financial year. An entity is considered to be a small business if the aggregated turnover for the current year is actually or likely to be less than $10 million, of if the turnover was actually less than $10 million in the previous year. You must also satisfy the criteria of having carried on a business during the year to be recognised as a small business.

Small businesses have access to the simplified depreciation rules if their turnover is under $10 million.  This means they can immediately write off the value of assets up to $20,000 (until 30th June 2018). They also have access to lower company tax rates, simplified trading stock rules and an immediate deduction for prepaid expenses.

However the $10 million threshold doesn’t apply for all available concessions. For example access yo the small business CGT concessions are only available to small businesses whose turnover is under $2 million.

Also small businesses that have an aggregated turnover of $5 million or less are entitled to claim the Small Business Income Tax Offset. This offset reduces the amount of tax payable on business income. The rate of this offset has increased from 5% to 8% in the 2017 financial year, but it is still capped at $1,000.

Pro Tip:
If you are a sole trader or partnership and the income you received is considered to be Personal Services Income, you are not eligible for the Small Business Income Tax Offset, unless you are considered to be a Personal Services Business.

Author:  Tessa Jachmann
Email:  tessa@faj.com.au