Taxation Law T5: Small Business Entity Benefits for Belinda

This report provides an analysis of the tax benefits available to Belinda's new business if she opts for the Small Business Entity (SBE) option. The report examines eligibility criteria, focusing on turnover limits and business structure. It details concessions for trading stock, including turnover thresholds and stock value fluctuations. The report also explores asset pool deductions, clarifying the immediate deduction rules for depreciable assets and outlining specific asset value limits based on purchase dates. Furthermore, the report covers capital gains tax (CGT) concessions available to SBEs when disposing of active assets, emphasizing turnover and asset value requirements. The report concludes by summarizing the key benefits and considerations for Belinda, providing her with informed advice on the financial implications of choosing the SBE structure.

Running head: TAXATION LAW
TAXATION LAW
Name of the Student
Name of the University
Author Note:

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Executive Summary
The purpose of the report is to advise Belinda on the tax benefits available for her new business.
She wishes to opt for the Small Business Entity (SBE) option from her new business but Trex is
not sure whether this is the good choice for them and what relevant benefits they can get when
choosing the SBE.

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Table of Contents
Eligibility for SBE...........................................................................................................................2
Concessions for trading stock..........................................................................................................2
Asset pools.......................................................................................................................................3
Capital gains tax concession............................................................................................................4
References........................................................................................................................................5

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Eligibility for SBE
Any business can be subjected as a small business entity only if it is a sole trader, and
partnership, a company or trust with effect from 1 July 2016, and if the operation is done
accordingly whole year of income or part of it ("Definitions", 2020). A company is subjected as
a small business entity if the company is operating its business having a total turnover of the
company less than $10 million ("Eligibility", 2020). Here, in case of business operated by
Belinda, the turnover is marked at $500,000, including GST for the financial year 2019, which
simply depicts that she can opt for Small Business Entity.
Concessions for trading stock
i. The rule for having concession for trading stock is that the small business needs to
have a total turnover of not more than $10 million on an annual basis.
ii. In addition, the business if already trading, it is important to know that its value of
stock being traded gets altered by not more than $5,000 in a particular year
("Simpler trading stock rules", 2020).
Here, Belinda’s Business can be subjected to get concession for trading stock if in the
second case (ii) also, the business is engaged in any kind of trading activities of stock.
Asset pools
i. An immediate deduction can be claimed using rules of simplified depreciation where
assets that are depreciable having cost lower than $30,000.
ii. In addition, business including total turnover of $10 million and not exceeding that, are
tend to claim for deduction for each of asset they have purchased, whether it is of first use
or just being ready to use. The amount limit for claim of deduction for each asset are up

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to the following condition as per ("Uniform capital allowance system: low-value pools",
2020):
a) 20,000, before 29 January 2019.
b) From 29 January 2019 until ‘2 April 2019, before 7:30 pm (AEDT),’ $25,000.
c) From ‘2 April 2019, (7:30 pm (AEDT’ until 30 June 2020, $30,000.
The business of Belinda is having two assets photocopy machine and motor vehicle worth
$5,500 and $68,800. The asset ‘photocopy machine’ is fulfilling the (i) and (ii) criteria as it is
lower than $30,000 and the total turnover of the business is also $500,000 which is less than $10
million. Moreover, the photocopy machine was purchase on 15th, Feb 2019 but got ready to use
on 1st, March 2019, which comes under (b) amount limit for claim of deduction for each asset.
That means that the claim of deduction allowed on photocopy machine will be $25,000.
Motor vehicle for $68,800 got purchased on the 1st, May 2019 including GST, which is to be
used for business purposes only. In this case also, as the amount is exceeding the $30,000 it
cannot be covered under first criteria but can be covered under the second one as the total
turnover of the business is $500,000 which is less than $10 million. There will be a claim of
deduction for $30,000 for motor vehicle as the purchase was made after 2 April 2019 and before
30 June 2020.
Capital gains tax concession
The (CGT) concessions for SBE are available at the time of disposing of an active asset
by the company. In addition, if the business is having a total turnover of less than $2 million and
the assets are used for small business purpose. Moreover, a concession is allowed when there are

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assets (net) not exceeding $6 million, which exclude assets of personal use ("Small business
CGT concessions", 2020).

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References
Uniform capital allowance system: low-value pools. (2020). Retrieved 18 April 2020, from
https://www.ato.gov.au/business/depreciation-and-capital-expenses-and-allowances/in-detail/low-
value-pools/uniform-capital-allowance-system--low-value-pools/?
page=2#Simplifed_depreciation_rules
Eligibility. (2020). Retrieved 18 April 2020, from https://www.ato.gov.au/Business/Small-business-
entity-concessions/Eligibility/
Small business CGT concessions. (2020). Retrieved 18 April 2020, from
https://www.ato.gov.au/General/Capital-gains-tax/Small-business-CGT-concessions/
Simpler trading stock rules. (2020). Retrieved 18 April 2020, from
https://www.ato.gov.au/Business/Income-and-deductions-for-business/Accounting-for-trading-
stock/Simpler-trading-stock-rules/
Definitions. (2020). Retrieved 18 April 2020, from https://www.ato.gov.au/business/small-business-
entity-concessions/eligibility/definitions/