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From 1 July 2007 the ATO has broadened the criteria for a range of small business tax concessions. Small businesses with an annual turnover less than $2 million are called small business entities and may qualify for a range of tax concessions.
Eligible businesses can choose to use the concessions which suit their business although they may have to satisfy additional conditions. They will have to check if they qualify for the concessions each tax year.
Some of these concessions were previously only available to businesses in the simplified tax system. The simplified tax system no longer operates, however all of its concessions remain available to eligible businesses.
What are the concessions?
Capital gains tax (CGT) 15 year asset exemption
If you are aged 55 or older, retiring and your business has owned an asset for at least 15 years you won’t pay CGT when you sell the asset.
CGT 50 per cent active asset reduction
If you’ve owned an asset to conduct your business (an ‘active asset’) you’ll only pay tax on 50% of the capital gain when you sell the asset.
CGT retirement exemption
There is CGT exemption on the sale of a business asset, up to a lifetime limit of $500,000. If you are under 55, money from the sale of the asset must be paid into a complying superannuation fund or approved deposit fund or a retirement savings account.
CGT roll-over
If you sell a small business asset and buy a replacement, you can roll over your CGT liability to the value of the replacement asset. This means you won’t pay any CGT owing until you sell the replacement asset.
Simpler depreciation rules
Generally, you can pool your assets to make depreciation calculations easier and also claim an immediate deduction for most assets costing less than $1,000.
Simpler trading stock rules
You can choose whether or not to do an end-of-year stock take if the value of your trading stock has not increased or decreased by more than $5,000 over the year.
Immediate deduction for certain prepaid business expenses
You can claim an immediate deduction for prepaid business expenses where the payment covers a period of 12 months or less that ends in the next income year.
Entrepreneurs’ tax offset (ETO)
The entrepreneurs’ tax offset may reduce your tax payable by up to 25% where your business has turnover less than $75,000.
Accounting for goods and services tax (GST) on a cash basis
You are not required to account for the GST on a sale you make until you receive payment for the sale.
Annual apportionment of GST input tax credits
If you purchase items that you use partly for private purposes, you can choose to claim full GST credits for these items on your activity statements, and then make a single adjustment to account for the private use percentage at the end of the year.
Paying GST by instalments
You can pay GST by instalments worked out for you by the Tax Office. You can vary this amount each quarter if you choose.
Fringe benefits tax (FBT) car parking exemption
In some cases you may be exempt from FBT for employee car parking.
If you would like more information on these concessions or wish to discuss how they are relevant to your business, please contact Peter Lever at Northstar Accountants on 9999 2344 or Peter@nsg.com.auThis e-mail address is being protected from spam bots, you need JavaScript enabled to view it
The contents of this Newsletter are general in nature. We therefore accept no responsibility to persons acting on the information herein without first consulting us.
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