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More taxpayers can access the benefits of being an ‘SBE’

Editor: Recent changes to the law have expanded the eligibility criteria for a taxpayer to be considered a ‘Small Business Entity’ (or ‘SBE’), meaning more businesses will be able to utilise the tax concessions that are only available to SBEs.

Broadly speaking, for the year ending 30 June 2017, a business taxpayer will be an SBE if its ‘aggregated turnover’ is less than $10,000,000.

That is, where the business’ ‘aggregated turnover’ (taking into account the turnover of the entity carrying on the business and the turnover of its related parties) is less than $10,000,000, it will be able to access most of the concessions available to SBE taxpayers, including:

  • Access to:
    • the lower corporate tax rate of 27.5%;
    • the SBE simplified depreciation rules, including the ability to claim an immediate deduction for assets costing less than $20,000;
    • the simplified trading stock rules;
    • the small business restructure rollover relief;
    • deductions for certain prepaid business expenditure made in the 2017 income year;
    • the simplified method for paying PAYG instalments calculated by the ATO; and
    • the FBT car parking exemption;
  • Expanded access to the FBT exemption for portable electronic devices;
  • Ability to claim an immediate deduction for start-up expenses; and
  • The option to account for GST on a cash basis and pay GST instalments as calculated by the ATO.

Editor: Note that the reduction in the SBE company tax rate to 27.5% for the 2017 income year was accompanied by a limitation on the maximum rate that such companies can frank their dividends also to 27.5%.  Consequently, if an SBE company fully franked a distribution before the law changed on 19 May 2017, the amount of the franking credit on the distribution statement provided to shareholders may be incorrect (if the franked distribution was based on the 30% company tax rate).

The ATO has set out a practical compliance approach for such companies to recognise the change and to notify their shareholders.  Please contact this office if you would like more information about this.

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