As part of the Government’s Ten Year Enterprise Tax Plan, the Small Business Entity (SBE) turnover threshold increased from $2 million to $10 million from 1 July 2016.
Providing you carry on a business and have an aggregated turnover of less than $10m the SBE concessions available include the following:
- Simplified depreciation rules allowing SBE taxpayers to choose an immediate write off for assets costing less than $20,000 (note: this threshold will reduce to $1,000 for assets ready for use after 1 July 2017).
- Simplified trading stock rules. Currently those businesses who do not qualify as an SBE must conduct a stocktake at the end of the financial year to determine their closing stock balance for tax purposes. An SBE can estimate their closing stock balance without conducting an additional stocktake at the end of the financial year. This concession is only available if the movement in trading stock can be reasonably estimated as $5,000 or less.
- Prepayment rules allowing SBE taxpayers to claim an immediate deduction for prepayments that have an eligible services period of 12 months or less and the period ends before the end of the next income year. Non-SBE’s must apportion these expenses over the shorter of the eligible services period and 10 years.
- GST/BAS concessions allowing the SBE taxpayer to elect to account for GST on a cash basis and pay GST instalments as calculated by the ATO instead of submitting a BAS.
- PAYG instalment concession allowing taxpayers to choose to receive a quarterly pre-printed GDP-adjusted instalment to be paid rather than a calculated PAYG instalment.
- Reduced company tax rate of 27.5% available for SBE taxpayers in 2016/17 as opposed to the standard company tax rate of 30%.
- Immediate deduction of specified eligible business start-up costs rather than being restricted to write these costs off over a 5-year period.
- FBT concessions such as allowing an SBE employer to provide more than one identical work related items within a single FBT year; for example, a work-related phone and laptop. These concessions will apply from 1 April 2017.
- Asset restructure rollover for a SBE taxpayer and connected entities allowing restructure of business active assets for genuine business purposes with deferred income tax consequences.
The increase in the small business entity turnover threshold has provided great benefit in the tax planning for 2017 financial year. If you are wondering if your business is eligible for the SBE concessions, or how you can take advantage of this new rule, please contact us on 03 9603 0066.