For small businesses, there is a small business income tax offset which can reduce the tax you are required to pay by up to $1,000 each year! The way in which these offset works is that it is calculated based on the proportion of tax payable on your business income.
To be eligible for this small business income tax offset, you are required to be carrying on a small business as a sole trader or have a share of net small business income from a partnership or trust.
After the 2016-17 tax year – you are required to have an aggregated annual turnover of less than $5 million. Please see the below table for the progressive changes to the small business tax offset.
Calculating the Offset
The offset is worked out based on the proportion of tax payable relating to your total net small businesses income. Your aggregated turnover threshold and your rate of offset depend on the income year of your return. Your offset will be your rate of offset of the following amount, up to the limit of $1,000:
If your total net small businesses income is greater than, or equal to, your taxable income, your offset will be your rate of offset of your basic income tax liability for the year. The offset amount will be shown separately on your notice of assessment.
Claiming the Offset
We calculate your offset using information from your tax return. Your offset amount will be shown on your notice of assessment.
Your net small businesses income is the sum of your assessable income from carrying on your business, minus any deductions. If your net small businesses income is a loss, it’s treated as zero and you’re not entitled to the offset. If you had more than one sole trader business during an income year, you combine all your assessable business income from all your sole trader businesses and then minus the deductions from that total income.
Get in Contact with Us!
If you’re interested in how the small business income tax offset can help you save thousands, then don’t be afraid to get in touch with your local tax experts at R T Accounting & Taxation Services.