Below is an excerpt from the newly released Small Business Tax Concessions Guide, providing an overview of the tax concessions pertinent to small businesses.
With effect to year ended 30 June 2016, an entity will constitute a small business entity where it carries on a business and it satisfies the aggregated turnover test of $2m.
There are proposed changes to this definition with effect from 1 July 2016.
OUTLINE OF CONCESSIONS
The purpose of this book is to provide a comprehensive and practical guide to the small business tax concessions by:
- Outlining the various concessions available to small business taxpayers
- Explaining the conditions that must be satisfied to access the concessions, and
- Demonstrating the manner in which the rules apply in practice.
There have been changes to the concessions and their application over time. To enable the book to be concise and relevant, the book addresses the rules as they apply from the 2015/16 income year (including payroll tax rules for the 2016/17 income year) with mentions of proposed changes. The historical and transitional provisions prior to this time will not be addressed in detail.
The central concepts that are relevant for determining a taxpayer’s eligibility for the small business tax concessions are detailed in Chapter 2. The primary focus of the chapter is the central concept of a “small business entity” and the relevant conditions that must be satisfied to be classified as such. Relevant concepts, such as “affiliate” and “connected entity”, are also explained.
The CGT small business concessions and the manner in which they apply are covered in chapters 3 and 4. Chapter 3 provides a summary of the CGT small business concessions, the basic conditions that must be satisfied by a taxpayer in order for the relevant concessions to apply and the meaning of the concepts that are central to the application of the CGT small business concessions. The manner in which the CGT small business concessions interact with the CGT general discount for assets held for at least 12 months, any current year or prior year capital losses and the inclusion of the balance of any capital gain in the taxpayer’s assessable income are also discussed.
Chapter 4 considers each of the four traditional CGT small business concessions and the conditions that must be satisfied for the concessions to apply together with the small business restructure roll-over that is available for both CGT and income tax consequences. The concessions are:
(1) CGT 15-year exemption (¶4-100)
(2) CGT 50% active asset reduction (¶4-300)
(3) CGT retirement exemption (¶4-400)
(4) CGT small business roll-over (¶4-600)
(5) Small business restructure roll-over (¶4-800).
The application of the GST system for small business taxpayers is discussed in chapters 5 and 6. The specific GST concessions that are available for small business taxpayers are considered in Chapter 6, including:
- The ability to account for GST on a cash basis (¶6-100)
- The ability to pay GST by quarterly instalments (¶6-300), and
- The annual apportionment of GST input tax credits for acquisitions and importations that are partly creditable (¶6-500).
Chapter 7 considers the ability for a small business taxpayer to utilise the concessions and exemptions from payroll tax applying in the relevant states and territories throughout Australia with effect to the 2016/17 income year.
Chapter 8 deals with the application of the superannuation law to a small business taxpayer. It considers:
- The ability to make employer contributions (¶8-200) and personal contributions (¶8-240) to a complying superannuation fund and the deductions available
- The ability of a taxpayer that has accessed the CGT small business concessions to make certain additional contributions up to the lifetime CGT cap into a complying superannuation fund without counting towards the taxpayer’s annual concessional cap and the annual non-concessional contribution cap (proposed to be replaced with a lifetime non-concessional cap with effect from 1 July 2017) (¶8-500)
- A tax planning opportunity available for a small business taxpayer to transfer certain business assets into a complying superannuation fund (¶8-600), and
- The ability of a taxpayer to receive concessionally taxed superannuation benefits in accordance with the transition to retirement rules, without being required to retire from the workforce and the proposed changes to this regime (¶8-700).
Chapter 9 deals with various other tax concessions for small business, including the following income tax concessions:
- The lower corporate tax rate for companies that are small business entities (¶9-050)
- The tax offset for non-corporate small business income (¶9-060)
- The immediate deduction for professional establishment expenses (¶9-080)
- The simplified depreciation rules (¶9-100)
- The simplified trading stock rules (¶9-200)
- The tax concessions available for investment in innovation companies (¶9-300 and ¶9-350), and
- The immediate deduction for certain prepaid business expenses (¶9-400).
Chapter 9 also discusses the exemption available for car parking fringe benefits (¶9-500), the FBT exemption for multiple portable electronic devices (¶9-570), the application of the standard two-year period for amending a taxpayer’s income tax assessment (¶9-700) and the ability to pay PAYG instalments based on GDP-adjusted notional tax (¶9-600).
The Small Business Tax Concessions Guide – 4th Edition provides you with comprehensive and practical information to help you understand the conditions that must be satisfied for a particular concession to apply and how the concession will work in practice.