Small Business Entities

To qualify for Small Business Entity concessions in an income year you must:

  • Run a business in that year
  • Have an annual turnover of less than $2 million for that year and the previous year

The ATO provides a list of concessions small business entities may elect to use and include concessions for Capital Gains Tax (refer CGT page).

Election is optional and the rules are designed to reduce the tax and compliance costs for small businesses, enabling you to claim a full deduction for certain prepaid expenses.

Two main Small Business Entity concessions include:

  • Simplified depreciation rules - Most depreciating assets that cost less than $1,000 each are written off. Most other depreciating assets are pooled and depreciated at 15% in the first year and 30% in the subsequent years if their effective life is less than 25 years. If the effective life is over 25 years then the rate is reduced to 2.5% in the first year and 5% in subsequent years.
  • Simplified trading stock rules - Businesses only need to conduct stock takes if the value of the stock has not increased or decreased by more than $5,000 over the year.

FURTHER INFO: see the Small business entity concessions essentials section of the ATO website.

IMPORTANT DISCLAIMER: This article is published as a guide to clients and for their private information. This article does not constitute advice. Clients should not act solely on the basis of the material contained in this article. Items herein are general comments only and do not convey advice per se. Also changes in legislation may occur quickly. We therefore recommend that our formal advice be sought before acting in any of these areas.


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