Small Business Entity (SBE) In Australia

Running head: SMALL BUSINESS ENTITY (SBE) IN AUSTRALIA 1
Small Business Entity (SBE) In Australia
Name
Institutional Affiliation

SMALL BUSINESS ENTITY (SBE) IN AUSTRALIA 2
SMALL BUSINESS ENTITY (SBE) IN AUSTRALIA
Introduction
Small Business Entity (SBE) are important in the economy of Australia. The government
of Australia gives the eligibility criteria for a SBE and accords such entities a range of
preferential treatment including tax concessions. This paper discusses a range questions
regarding the SBE in Australia to help understand the SBE’s role and operations in Australian
economy.
Explain how and what criteria are used to determine and define a Small Business Entity?
What criteria are used by the ATO? Which business entities can qualify as an SMALL
BUSINESS ENTITY?
Various criteria are used in Australia to determine and small business entity. These
criteria include number of employees (less than fifteen), and annual revenue turnover (less than
ten million). According to ATO, an entity is an SBE for the CGT concession if it is an
individual, company, trust or partnership which carries on a business, and with an aggregate
turnover below ten million (from April 1, 2017). The aggregate turnover is the yearly turnover
added to the yearly turnovers of any business entities which are connected with or affiliates an
entity. To determine if an entity is an SBE for a current year, ATO provides that a business
chooses a calculation method and calculate its aggregate turnover. The calculation of aggregate
turnover can use three methods including previous, estimated current or actual current year with
most businesses only required to consider the previous year method. Thus any business entity
can qualify be it individual, trust, company or partnership provided it meets the two criteria
above (carrying on business for whole or portion of income year and aggregate turnover of
below ten million dollars (turnover-threshold)).

SMALL BUSINESS ENTITY (SBE) IN AUSTRALIA 3
Why has such significant favorable treatment been given to SMALL BUSINESS
ENTITY’s? What is the basis for this preferential treatment by the government?
Irrespective of the definition used (ATO definition, Fair Work definition, ABS), small
business entities are important in Australia. It remains clear that small business entities in
Australia form a substantial part of Australian economy thereby providing significant
employment for millions of Australians. In fact, the significance of small business entities in
Australia remains underscored in the latest report by Industry Task Force on Leadership and
Management Skills that showcases that Australia is remarkable for small number of the global
scale enterprises that it is supporting.
Solely, few enterprises in Australia employ over 1000 individuals and this remains a
small number by major trading nation standard. Small business entities in Australia have been
the source of nearly all private sector growth of employment beginning 1991. Thus, most of jobs
created in the country will increasingly be generated by small business entities. With
unemployment remaining a fundamental challenge facing Australia society, supporting important
small business entities takes on increased meaning, specifically due to the potential of small
business entities to become more significant contributors to the expanding export base of
Australia (Corporation Act, 2001).
The government of Australia believes that small business entities remain more important
to its economy in terms of wealth creation, competition stimulation, and job creations. They are
also given such significance because they help counteract market failures; the desirability of
countering inherent advantages being small like regressivity of compliance cost and asymmetry
of taxable losses and profits; and the need to ensuring that small business are able to survive