Definition

Small business entity concessions are a set of tax benefits and concessions provided by the Australian Taxation Office (ATO) to eligible small businesses to ease their tax burden and support their growth and sustainability.

What are the small business entity concessions?

Small business entity concessions offer various tax benefits and incentives to eligible businesses, including:

• ]Simplified depreciation rules: Small businesses can claim an immediate deduction for the full cost of most assets costing less than the instant asset write-off threshold.
• Simplified trading stock rules: Eligible businesses can choose to use simplified methods for valuing trading stock.
• Capital gains tax concessions: Small businesses may be eligible for CGT concessions when disposing of certain assets used in their business.
• Fringe benefits tax exemptions: Certain small business benefits may be exempt from fringe benefits tax
• Goods and services tax concessions: Small businesses benefit from simplified GST reporting requirements.
• Small business income tax offset: Eligible individuals with small business income may be entitled to a tax offset of up to $1,000 per year
• Pay as you go instalment concessions: Small businesses can benefit from reduced PAYG instalments and quarterly reporting requirements.
• Research and development tax incentives: Small businesses engaged in eligible R&D activities may qualify for tax offsets or cash refunds.

To access small business entity concessions, businesses must meet specific eligibility criteria, including having a total revenue below the threshold, being a trading entity, and meeting certain ownership and control tests.

Example of small business entity concessions

Jane, the owner of a small café with an aggregated revenue of $2 million, benefits from small business entity concessions. She purchases a new coffee machine for $10,000 and immediately claims a deduction for the full cost under the simplified depreciation rules. Additionally, Jane qualifies for the small business income tax offset, reducing her overall tax liability. These concessions help Jane manage her cash flow and invest in her business’s growth.