As a small business, you can apply for various types of tax concessions. However, you must be aware of tax concessions announced by the legislative authority. A small business is considered a ‘small business entity.’ If you are a small business entity, then you may be eligible for accessing various tax concessions. However, if you want to access those tax concessions to save money on taxes, it is advisable to seek help from taxation accountants. Furthermore, if you are not a small business entity, even then you may qualify for certain tax concessions. Keep reading this blog to know more about possible tax concessions.
What are Tax Concessions?
Basically, tax concession means a reduction in the tax made by the government in the amount of tax that a business entity or organisation has to pay at the end of the financial year. If you want to save money on taxes, it is advisable to apply for possible tax incentives or concessions.
What are Possible Tax Concessions for Small Businesses?
The best tax agent in Melbourne knows everything about tax incentives that an individual or company can claim to save money on tax returns. Take a look at the following section to know what’s new for small businesses:
- Interaction of Tax Depreciation Incentives
Business entities that are eligible may be looking at which tax depreciation incentive is suitable for them. For an asset, only one incentive can be applied. If more than one incentive is applied to an asset, the application order is:
- Temporary full expensing
- Instant asset write-off
- Backing business investment
- General depreciation rules
- Lower Company Tax Rate Changes
From the 2017-2018 to 2019-2020 income years, companies that fall into the category of base rate entities can apply the lower 27.5% company tax rate. In the 2020-21 income years, for base rate entities, the lower company tax rate was reduced to 26% and is 25% from the 2021-22 income years. A base rate entity is eligible for this, which:
- Has an aggregated turnover below the aggregated turnover threshold which is $25 million for the 2017-18 income year and $50 million for the 2018-2019 to 2021-2022 income years.
- 80% or less of their assessable income is considered base rate entity passive income that includes dividends, interest, royalties, rent and net capital gain. It replaces the need to be carrying on a business.
Many of you may have no idea about these types of concession changes. If you are among them, it is suggested to hire a registered tax agent in Melbourne for your company.
- Increased Small Business Income Tax OffsetYou are eligible to claim the small business income tax offset if you either:
- Are a small business sole trader
- Possess a net small business income share from a trust or partnership
Small businesses with turnover below $5 million are eligible for the small business income tax offset. The offset rate is:
- 8% from 2016-2017 to 2019-2020
- 13% in 2020-2021
- 16% from 2021-22
If you don’t have much time to look after these concessions for your business, you can also hire a tax accountant for your company. If you are low on your budget, you can also look for a cheap tax agent in Melbourne for affordable accounting solutions.
- Expanded Accessibility to Small Business Concessions
More businesses may now claim most small business concessions. From July 1, 2016, various small business concessions became available for most businesses with turnover below $10 million. Earlier, the turnover threshold was $2 million.
From 1 April 2017, the turnover threshold for FBT concessions increased to $10 million and from 1 April 2021, it increased to $50 million. From July 1, 2021, businesses that are not considered small businesses because their turnover is $10 million or more, but not more than $50 million can also claim these small business concessions:
- Excise concessions
- A two-year amendment period
- PAYG instalments concessions
- Trading stock rules
Apart from knowing tax concessions for your business to save money, you must also be on the top of your business books. Your business books must be updated and accurate so tax accountant can prepare and lodge tax returns on your behalf. For accurate business books, you can also seek help from bookkeepers for small businesses.
The blog is all about tax concessions that small business entities can claim to save money. If you are a small business entity, then you must be aware of these types of tax concessions. For more information on tax incentives or concessions, you can reach Reliable Melbourne Accountants.