A Tax Guide for Small Businesses

Nowadays start-ups and small businesses are being encouraged because there often referred to as the engine room of an economy. This sector is also ironically the largest employer in the country. Research by the COSBOA (Small Business Organization of Australia) show that around 5.1 million jobs were generated by small businesses, this is about half the private sector.

Let’s start by defining what a small business is,

What is considered a small business?

When you look at it from the tax angle, a small business is something that generates a turnover of less than 10 million dollars per year. This is an exception to the small business CGT concessions. The threshold is 2 million dollars.

Using these 10 million threshold businesses tend to split activities to enjoy the concession so according to the law the turnover is an aggregated amount of all the affiliated businesses.

What are the Taxes imposed on small businesses?

Since small businesses are considered important there are loads of tax concessions and tax breaks offered by the government.

Instant Asset Write Off

This is undoubtedly one of the best tax breaks offered to small businesses. This helps small business acquires capital assets so that it can grow and also reduce taxable profits.

This tax break is made even generous by reducing the cost for the asset that can be written off from 300k AUD(till March 2020) to 150kAUD(up to December 2020). The threshold has also increased from 50 million dollars to 500 million dollars over the same time period.

The list of assets that can be claimed includes cash registers and POS devices, Vehicles, Fittings for you premises, plant and machinery, computers, security systems and even accounting software.

Trading Stock

According to the tax act if your stock value hasn’t changed over the tax year by more than 5000 dollars then you can use the same stock price you used at the start of the year when it comes to year end.

Good and Service Tax

GST obligations are also simplified for small business in the sense that GST only needs to be accounted for once the payment is received. You can also opt to pay for GST instalments and the ATO will even work out the calculations for you.

If you don’t know how much GST to charge your customers you can use a GST calculator online.

Help for CGT(Capital Gains Tax)

There is a special CGT concession for small businesses in addition to the 50% discount already provided to individuals, suer funds, and trusts.

There are 4 CGT concessions that can be used by small businesses to reduce or eliminate capital gains made by the owners or by the business itself. The concessions are the 15-yearexemption, the retirement exemption, the 50% active asset exemption and the CGT rollover.

This is just a quick summary of what the tax concessions are when it comes to small business in Australia. There are many more credits available and be found on the Australian tax or corporate website.

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