Tax Breaks – Small Businesses

The Australian Taxation Office (ATO) defines a small business as having a total annual income between $2 million and $10 million. If your firm falls into this criterion, we have gathered some useful information on tax breaks for you.  A tax break is any sort of tax deduction, tax credit or tax exemption. It is a means of reducing your tax expense while filing your annual tax return. To save you some time, we have compiled a list of a few tax breaks for your small business.

  1. Instant asset write-off:

Plant and machinery make up a major chunk of your fixed assets. If you have purchased an asset (new or second-hand) costing less than the relevant instant write-off threshold, your accountant will claim a tax deduction of the entire cost while filing your tax return for the year the asset was made available for use.

As per the law, you can immediately claim a tax deduction on the business portion of your asset if it costs less than $30,000 and was purchased and installed between the 2nd of April 2019 and the 30th of June 2020. Similarly, if your asset was bought and installed during the period of the 29th of January 2019 and the 2nd of April 2019, the relevant tax threshold for tax deduction is $25,000. Any asset bought and made available to use before the 29th January 2019 also has a threshold of $20,000.  

This tax break encourages you to re-invest in for business’s growth and expansion.

  • Accelerated depreciation:

If you have installed fencing and water facilities after the 12th of May 2015, you can get a tax break on the entire cost of such asset in the year it was installed instead of claiming tax deduction on depreciation over the years.

  • Lower tax rate:

A base rate entity i.e. an entity having a turnover of less than $25 million and having 80% or less of their assessable income as base rate entity passive income is entitled to a lower company tax rate of 27.5%. A base rate entity gets a tax break by having a lower than usual tax rate charged for companies while filing their income tax return for the year 2018-2019.

  • Fringe Benefits Tax concessions:

FBT concession is a tax break that lets you provide employee benefits without being charged a fringe benefit tax on such expense.

If you are a small business entity providing car parking benefits to your employees, your accountant is going to exempt such expenses from your tax return. This is valid only if you meet all the following conditions:

  • The parking area provided is not a commercial car park
  • You are not a listed public company, subsidiary of a listed public company or a government body
  • You were a small entity or had an income of less than $10 million in the last income year before the relevant FBT year

The second exemption you can claim as an FBT concession is if you provide your employees with work-related portable electronic devices that are substantially identical in the same FBT year. These electronic devices include laptops, mobile phones, tablets, GPS and calculators and shall be exempt from the FBT charge.

  • Capital Gains Tax concessions:

            If you are carrying out your business and producing income at your place of residence, your home becomes an assessable CGT asset. You may get a tax break while selling your home to minimize or nullify any CGT that might arise while filing your tax return. A CGT concession is valid if your turnover is less than $2 million.

If you are a small business owner interested in taking advantage of our government’s tax breaks. Come and speak to us here at Ross Accounting. Let us  help you save more money and grow your business.

All information sourced from the Australian Taxation Office (ATO)

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