Tax Concessions for Small Business Entities in Australia

This report discusses the various tax concessions available for small business entities in Australia, including simplified depreciation rules, lower company tax rates, and more. It also covers the eligibility criteria for each concession and the benefits they offer to small businesses. The report concludes that these concessions are essential for the growth and sustainability of small businesses in the country.

Running head: TAX
Tax
Name of the Student:
Name of the university:
Authors Note:

1TAX
Table of Contents
Simplified depreciation rules- instant asset write off:................................................................1
Accelerated depreciation for primary producers:.......................................................................2
Deductions for professional expenses for start-ups...................................................................2
Immediate deductions for prepaid expenses:.............................................................................3
Lower company tax rate changes:..............................................................................................3
PAY instalment concession:......................................................................................................3
Simplified trading stock rules:...................................................................................................4
CGT 15 year exemption:............................................................................................................4
CGT retirement exemption:.......................................................................................................4
Annual apportionment of the GST input tax credits Paying GST by instalments.....................5
Excise concession.......................................................................................................................6
CGT 15 year asset exception......................................................................................................6
Conclusion:................................................................................................................................7
Reference....................................................................................................................................8

2TAX
Introduction:
In the present report an effort has been made is respect of the listing of the various
concessions of tax that are being made available to the small business entities of the country.
The concessions are required for the growth and the sustenance of the business culture within
the country. The small enterprises play a major role in the economy of the country hence
these are the few steps that are taken up by the government for their economic interest. A
small business entity is referred to as an individual, partnership, company or a trust that is
engaged in the business activities and has a turnover that is less than $2 million.
Simplified depreciation rules- instant asset write off:
This section refers to the deduction that is obtained to the tune of $20000. The same has
been extended until 30th June 2018. Under this provision if the taxpayer is a small business
entity and is, carrying out business activities it can deduct the portion of the assets that were
being used in the business if the same were bought at a cost of less than $20000 (Long et al.,
2016). For the purpose of getting this exemption has to be fulfilled:
a) The asset must be purchased between 1st July 2016 to 30th June 2018 and the turnover
of the taxpayer was less than $10 million.
b) It was purchased between 7:30 pm on 12th May 2015 to 30th June 2016 and the
turnover of the taxpayer is less than $2 million.
The deduction is available in respect of the every asset if the same has been acquired for less
than $20000 irrespective of the fact that the same is new or second hand. The deduction can
be claimed in the first year in which it was used or was installed and became ready for use.

3TAX
Accelerated depreciation for primary producers:
Under this provision, the entities or the individuals that are engaged as primary producers are
eligible for this deduction from 12th May 2015. Under the following method, the primary
producers can:
a) Engage in the immediate deduction of the cost that is incurred in respect of the
fencing and the water facilities.
b) Engage in the deduction of the assets that are used for the storing the fodder over a
period of three years.
The entities that are involved as primary producer can make use of the simplified
depreciation rules including the provision of instant write off.
Deductions for professional expenses for start-ups
Under this provision starting from the 1st of July 2015, the small businesses are entitled for
claiming certain deductions in respect of the expenditure that is incurred by them at the time
of starting of a small business (Maxwell, 2015). The deductible expense includes
professional, legal and accounting advice and the government fees and charges.
Immediate deductions for prepaid expenses:
Under this provision, the small business entities can claim deduction in respect of the prepaid
expense that had been paid by it and covers a period of 12 months or less and the same period
ends in the next income year of the taxpayer (O'faircheallaigh, 2017).
Lower company tax rate changes:
From the income year 2017-18, a base rate entity will be considered to be eligible for
a corporate tax rate that amounts to 27.5%. However, for the purpose of availing the same the
entity will have to be a small business entity.

4TAX
A base rate entity is referred to that entity which:
 Recorded a turnover that is less than the turnover threshold that is less than $25
million (increased from the threshold of $10 million) for the income year 2017-18 and
 Has conducted the business throughout the year.
For the purpose of working out the rate that is to be used while franking the distribution an
assumption has to be made that the aggregate income of the year will remain same as the
previous year (Thomson & Skali 2016). The lower 27.5% of the corporate tax rate will have
to be progressively applied to the base rate entities that are recording a turnover less than $50
million for the year 2018-19.
PAY instalment concession:
The small business entities have the option of pay as you go with the help of instalments.
The instalment amount will be computed by the statute. This saves a lot of time of the small
business entities in respect of the time that is spend by them for the purpose of calculating the
tax that has to be paid by them. On the option of the taxpayer, the amount can vary between
quarters. For the purpose of availing the concession, the turnover threshold is as follows:
a) $10 million from 1st July 2016 and
b) $2 million up to 30th June 2016.
Simplified trading stock rules:
Under this concession, the small business entities are allowed to compute its own value of
trading stock at the end of the financial year that is being reported in the tax year. The
taxpayer only needs to disclose how the estimation of the tax was done by him but there are
no requirement for any notification regarding the use of any estimate. The taxpayer can skip
to conduct a stocktake if the difference is less than $5000 between

5TAX
a) The value of the stock at the beginning of the income year and
b) The reasonable estimate of the value of the stock at the end of the year.
CGT 15 year exemption:
In case the tax payer is aged between 55 years and older and is retiring or has become
permanently incapacitated and the business carried out by him is more than 15 years old, the
taxpayer won’t be required to pay CGT in case of the disposal of the asset by sale, gift or
transfers (Thomson & Skali, 2016).
CGT retirement exemption:
Under the provision of this section, the taxpayer can avail a CGT exemption in
respect of the asset that has been sold up to a lifetime limit of $500000. For the purpose of
availing the concession, the taxpayer must be of 55 years of age and below. The money
received by the taxpayer must be deposited into a complying superannuation fund or a
retirement savings account (McGregor-Lowndes & Williamson, 2018).
Accounting for GST on cash basis
The GST taxation law provides that if the turnover of a business entity does not exceed $10
million from 1 July 2016 or $2 million up to 30 June 2016 then such business will be
regarded as small business entity. In this case, there are two prescribed method for accounting
for GST cash basis and accrual basis. The entity may opt for accounting under cash basis. In
this process of accounting the business will eligible to take the input credit on GST for the
same period on which they have made the sales and purchases related activities. The details
of this activities should be filled under the prescribed statement and further they need to
notify the appropriate authority (Yates, 2016). It should be noted that if the turnover of the
business exceeds the above limitation then the entity must opt for accrual basis of accounting

6TAX
for GST. Therefore, the main concession is that the small business can take select any method
of accounting for GST.
Annual apportionment of the GST input tax credits Paying GST by instalments
The input credit of GST is allowed for the consumption of purchased goods for the business
purpose only. If the part of goods are taken for personal purpose then the entity can not avail
credit on that. Further the entity may disclose their personal consumption in any of the
following two ways:
 In the monthly or quarterly statement the entity must disclose the consumption for
business purpose and avail the eligible credit
 Either the entity disclose their annual consumption rate for making a single
adjustment.
This adjustments will either decrease the eligible refunds (credit) or increase the liability of
GST payment. If the concern exceeds the eligibility criteria they will not avail the concession.
Excise concession
A small business entity may apply change the reporting cycle from weekly to monthly for the
defer settlement of their excise duty and excise equivalent customs duty. The entity must fill
the excise return and pay the liability before 21st day of the following month only after
receiving approval from the appropriate authorities. Further if the entity wants to change the
monthly reporting cycle they must seek permission in writing for the change of periodic
settlement permissions (Cortis & Eastman, 2015).
CGT 15 year asset exception
No CGT will be payable in case transfer or sale of active assets which is owned more than 15
years if the owner of the business are aged more than 55 years and retiring or become

7TAX
permanently incapacitated . An active business asset means the assets acquired to carry on the
business. The proceeds from the above exemption might be contributed to the super fund and
the non-concessional contribution limits will not be affected for the purpose (Bateman, 2015).
This concession will be availed by only those entitles who had not exceeded the turnover of $
2 million.
CGT 50% active asset reduction
The entities eligible for the concessions must satisfy the basic conditions to avail the
CGT concession automatically. If the active business assets are sold after 12 months or more
then the capital gains will be reduced by 50% amount. This concession will not be applicable
to the small business restructure rollover. Further in the case of non- small business entities
the concession of 50% of CGT will be available on application to the appropriate authority.
Small business entities will avail such by only satisfying basic conditions (Feng, 2018).
CGT retirement exemption
The total CGT exemption can never be exceeded by $500,000 in lifetime. If the owner
is less than 55 years old then the proceeds from the CGT exemption should be contributed to
the superannuation fund or a retirement savings account without affecting the non-
concessional contribution limits (Hulse et al., 2018). After satisfying certain conditions an
individual may opt for retirement exemptions without termination of any business or activity.
The above concessions will provide the retirement benefits if the individual deposits in the
prescribed funds. Further the individual is not required to be retired (Iskhakov & Keane,
2016).

8TAX
Conclusion:
It can be concluded that the small entities that are operating within the country are
being provided with a wide range of deductions from the government. The reason for the
deduction that is given by the government is that the resources that are available with the
small entities for carrying out the business activities is very limited. The limited resources
that are available with the small entities have to be used by them for conducting business and
not for the purpose FO paying taxes to the government. For increasing the tax adherence the
statute, FO the country has ensured that the rate of taxes that are being levied on the small
entities is reduced significantly. For that purpose, the statute of the country has reduced the
applicable tax rate to only 27.5% in case of the small business entities that are operating
within the country.

9TAX
Reference
Bateman, H. (2015). Structuring the payout phase in a defined contribution scheme in high
income countries: Experiences of Australia and New Zealand. In Strengthening Social
Protection in East Asia (pp. 91-123). Routledge.
Cortis, N., & Eastman, C. (2015). Salary sacrificing in Australia: are patterns of uptake and
benefit different in the not‐for‐profit sector?. Asia Pacific Journal of Human
Resources, 53(3), 311-330.
Daley, J., & Wood, D. (2015). Fiscal challenges for Australia. Grattan Institute.
Feng, J. (2018). Voluntary Retirement Savings: The Case of Australia. Journal of Family and
Economic Issues, 39(1), 2-18.
Hulse, K., Martin, C., James, A., & Stone, W. (2018). Private rental in transition: institutional
change, technology and innovation in Australia.
Iskhakov, F., & Keane, M. (2016). Effects of Taxes and Safety Net Pensions on Life-Cycle
Labor Supply, Savings and Human Capital: the Case of Australia.
Long, B., Campbell, J., & Kelshaw, C. (2016). The justice lens on taxation policy in
Australia. St Mark's Review, (235), 94.
Maxwell, I. A. (2015). Technology and innovation: Tweaking the R and D tax
incentive. Chemistry in Australia, (Apr 2015), 32.
McGregor-Lowndes, M., & Williamson, A. (2018). Foundations in Australia: Dimensions for
international comparison. American Behavioral Scientist, 0002764218773495.
O'faircheallaigh, C. (2017). Mining and development: foreign-financed mines in Australia,
Ireland, Papua New Guinea and Zambia. Routledge.

10TAX
Thomson, R., & Skali, A. (2016). The Additionality of R&D Tax Policy in Australia.
Yates, J. (2016). Why does Australia have an affordable housing problem and what can be
done about it?. Australian Economic Review, 49(3), 328-339.