Am I Eligible for the Small Business Concessions?
When we say ‘business’ we mean the individual, partnership, company or trust that carries on the business activity. When we say ‘small business’ we mean ‘small business entity’, which is an individual, partnership, trust or company with aggregated turnover less than $2 million.
You are a small business if you are an individual, partnership, company or trust that:
- carries on a business for all or part of the income year, and
- has less than $2 million aggregated turnover.
There are three ways to work out if you are a small business for the current year:
- Use your aggregated turnover for the previous income year
- Estimate your aggregated turnover for the current year as at the beginning of the current year
- Use your actual aggregated turnover for the current year as at the end of the current year.
Most businesses will find the first method easiest. You must:
- Use the same method for any connected or affiliated business, and
- Keep records of how you worked out your aggregated turnover.
There are some exceptions and limitations that you need to be aware of if you are using the estimated current year or actual current year methods.
Method 1 - Use your previous year’s aggregated turnover
If your aggregated turnover for the previous income year was less than $2 million, you are a small business for the current year.
When you work out your aggregated turnover for the previous income year apply the current rules about aggregated turnover as if they were in force for the 2006-07 income year.
Method 2 - Estimate your current year aggregated turnover
If your estimated aggregated turnover for the current year is less than $2 million, you will be a small business for the current year. You can only use this method if your aggregated turnover was less than $2 million for one of the last two income years.
You must work out whether your aggregated turnover is more likely than not to be less than $2 million based on the conditions you know about at the beginning of the income year or, if you are starting a business part way through the year, at the time you start your business.
Factors to consider when estimating your turnover include:
- Your turnover in previous income years
- Whether you plan to reduce or increase staff in the current year
- Whether your business operating hours will increase or decrease
- Whether previous extraordinary sales or product lines will be available in the current income year
- Whether your business will face increased competition in the current income year
- Whether your business activity will increase or decrease because of changing conditions.
When you work out your aggregated turnover for previous income years, apply the current rules about aggregated turnover as if they were in force for those years.
If your aggregated turnover was $2 million or more in the 2005–06 income year and your STS group turnover figure was less than $2 million, you can use your STS group turnover figure.
Method 3 – Use your actual current year turnover
If your actual aggregated turnover at the end of the current year is less than $2 million, you are a small business for the current year.
If you use your actual aggregated turnover, you cannot use the goods and services tax (GST) and pay as you go (PAYG) instalments concessions for that income year. This is because you must choose these concessions earlier in the income year.
If you are not a small business in an income year, you may still be able to access the:
- capital gains tax concessions if you pass the $6 million maximum net asset value test
- fringe benefits tax concession if your combined ordinary and statutory income is less than $10 million.
This information is gerneral in nature and shoulkd not be used for definitive planning. Please check with your Accountant or Financial Advisor.
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