There are a range of tax concessions that your small business might be eligible for. Here are a few you should consider for your 2018 tax return.
$20,000 instant asset write-off
If you bought and installed business assets by 30 June, you may be able to write them off in your 2018 tax return.
You need to pool depreciating assets that cost $20,000 or more in a small business asset pool. Your tax adviser will have more information on how to do this.
You can claim a deduction this year if you have prepaid an expense that ends in the 2019 financial year – eg the rent for your business premises or an insurance policy.
Prepaid expenditure incurred by a small business entity is immediately deductible under the 12-month rule if:
- the eligible service period for the expenditure is 12 months or less
- the period ends no later than the last day of the income year following the year in which the expenditure was incurred.
- The 12-month rule applies to both deductible business expenditure and deductible non-business expenditure incurred by a small business entity that chooses to use this concession.
- If a prepayment does not meet the 12-month rule, you cannot claim an immediate deduction. Small business entities must apportion the deduction over the eligible service period or 10 years, whichever is less.
Simplified trading stock rules
This concession allows you to estimate the value of your trading stock at the end of the financial year to report in your tax return.
Eligible small businesses can use these simplified rules if there is a difference of $5,000 or less between:
- the value of your stock on hand at the start of the income year; and
- a reasonable estimate of the value of your stock on hand at the end of that year.
If you estimate that the difference between your opening and closing trading stock is $5,000 or less, then under the simplified rules, you don’t need to do a stocktake. Instead, you can include the same amount for your opening and closing stock in this year’s tax return.
- If you did not have any trading stock in the previous year, the value of trading stock at the start of the year is zero. This might occur if you have just opened a new business or if this is the first year you have trading stock.
Small business income tax offset
The small business income tax offset (also known as the unincorporated small business tax discount) can reduce the tax you pay by up to $1,000 each year.
You can get an offset of up to $1,000 if you’re a sole trader or have a share of net small business income from a partnership or trust.
The offset, which is worked out on the proportion of tax payable on your business income, is:
- 8% for the 2016-17 income year onwards;
- 5% for the 2015-16 income year.
The offset increases to:
- 10% in 2024-25;
- 13% in 2025-26;
- 16% in 2026-27.
Deductions for start-ups
Deduct the full cost of certain start-up costs for your new business, including professional advice in your tax return.
The range of deductible start-up costs includes professional, legal and accounting advice and government fees and charges.
Accelerated depreciation for primary producers
Primary producers can:
- immediately deduct the costs of fencing and water facilities
- deduct the cost of fodder storage assets over three years.
Primary producers who are small businesses can also use the simplified depreciation rules including instant asset write-off.
- The Government has proposed changes to allow primary producers to immediately deduct costs for fodder storage assets. This change is not yet law.
As a small business, you may be eligible for super concessions. These include:
- Superannuation clearing house: The Small Business Superannuation Clearing House helps you pay super guarantee contributions for all your employees in a single electronic payment. If you have 19 or fewer employees or a turnover under $10 million you can access this service.
- Contributions of small business CGT concession amounts to your super fund: You may be able to contribute amounts from the CGT 15-year asset exemption and retirement exemption to your super fund without affecting your non-concessional contributions limits. The turnover threshold for this concession is $2 million as it relates to CGT concessions (this threshold has not changed).
Read our complete September 2018 Taxwise Business Newsletter here