SBE Concessions

A brief summary of the more common concessions available to many small businesses.
Many business owners are not aware that there are a number of tax concessions available for small business entities (SBEs) which aim to reduce the tax compliance burden faced by Australian SBEs. In simple terms, this is a special provision for a SBE not to pay a tax that it would otherwise owe when selling a business - if the company meets certain eligibility criteria. These concessions apply to all classes of entities, as long as they meet the eligibility criteria. 



Why does this matter to me?


The matter of tax concessions can be quite complex, so rest assured that as your accountants, we ensure to take into consideration all of the elements relating to SBE tax concessions to provide you with the best tax solution for your business. 



However as a business owner or decision maker, it can be of benefit for you to understand the basic eligibility factors for tax concessions and the concessions available to legally minimise your tax, improve working capital and effectively develop a strategy for the disposal and acquisition of business assets.  

What are the tax concessions?

To be eligible for the SBE concessions a taxpayer must;

• Be carrying on a business; and
• Have annual turnover of less than $2 million

Should you meet these criteria there are a number of tax concessions available.

INCOME TAX CONCESSIONS

The income tax concessions available include, but are not limited to;

• Simplified depreciation rules;
  • Assets costing less than $6500 are immediately tax deductible
  • Allows immediate deduction of up to $5000 for motor vehicles purchased costing more than $6500
  • Most other assets can be pooled and depreciated at a rate of 15% for the first financial year and 30% for subsequent years
• Prepayment rules allowing the immediate tax deduction for prepaid expenses (providing the expense relates to a period of service no greater than 12months).
• A 2 year amendment period restricting the ATO (and unfortunately the tax payer) from amending an assessment beyond the 2 year limit.

CAPITAL GAINS TAX (CGT) CONCESSION


To receive CBR CGT concessions, the taxpayer must satisfy some basic conditions in addition to the above eligibility criteria. These conditions are governed by two main tests:

•  Maximum Net Asset Value Test
• Active Asset Test

Once the basic conditions are satisfied, the concessions available include;

• 15 year exemption, which allows the total capital gain to be disregarded providing the tax payer is aged 55 or older, retiring or permanently incapacitated and the active assets have been owned for at least 15 years
• 50% active asset reduction which allows the otherwise taxable capital gain to be discounted by 50% (not to be confused with the 50% discount given to for holding a CGT asset for greater than 12 months)
• Retirement exemption, which allows the gain to be exempted to a lifetime limit of up to $500,000. Where the tax payer is under the age of 55 the capital gain must be rolled into a complying superannuation fund.
• Replacement assets exemption, which allows a capital gain to be rolled over (i.e. deferred) if the tax payer acquired a replacement active asset within the replacement asset period (generally 2 years after the CGT event). Going forward the replacement asset carries the cost base of the original asset for CGT purposes. 

GOODS & SERVICES TAX

The GST concessions available include;

• Accounting for GST on a cash basis (as opposed to an accrual basis)
• Electing to pay GST by instalments on a quarterly basis.

PAY-AS-YOU-GO (PAYG) INSTALMENT CONCESSIONS

The PAYG instalment concessions allow a tax payer to elect to pay quarterly PAYG instalments as calculated by the ATO (as opposed to the tax payer having to calculate PAYG instalments).


This is an overview of some of the tax concessions available to small businesses. As the area of SBE tax concessions can be quite complex please contact us for more detailed information to suit your specific needs.