small business tax offset - do you qualify
Diane Challis

Diane Challis

Small Business Tax Offset – Do You Qualify?

The small business tax offset can help you reduce the tax you pay on business income. Find out if you qualify for it and how you could save thousands!

Running a small business can be very challenging. It’s no secret that many new businesses fail within the first five years, making the road to success a difficult one. One of the biggest issues many small businesses face comes in form of cash flow and ensuring there is enough cash coming in to pay the expenses going out.

It helps to try and keep those outgoing costs as low as possible, but the trick is finding where you can cut corners. Tax is one of those inevitable things that is faced each year, but there are actually ways to reduce it. The small business tax offset can help you reduce the tax you pay on business income. The question is, do you qualify for it?

What Is Small Business Tax Offset?

The small business tax offset is offered by the Australian Government to help small businesses reduce the tax they pay on business income by up to $1,000. The offset is worked out on the proportion of tax payable on your business income. It offers some tax debt relief for small businesses, freeing up some much-needed cash to go to other areas of the business.

Is My Business Eligible?

Wondering if your business is eligible for the small business tax offset? To be eligible, you must:

  • Be carrying a business as a sole trader, or have a share of net small business income from a partnership or trust.
  • Have an aggregated turnover of less than $5 million for the previous year.
small business tax offset

Applying For Small Business Tax Offset

Are you looking to apply for the small business tax offset? The great part is, you don’t have to do a thing. The Australian Tax Office will work out your offset when you lodge your tax return for that year. Your small business tax offset will be shown on your notice of assessment.

If you are looking for a little extra help when it comes to filing your business tax return, then you can make use of the small business income tax offset calculator. It works out your income amounts that will be used to work out your tax offset. It will also advise you on where to include them on your tax return. The calculator still won’t be able to tell you your small business tax offset, this is left to the ATO to work out for you.

How Is The Small Business Tax Offset Worked Out?

The ATO uses your total net small business income to work out the offset. It is based on the proportion of tax payable relating to your total net income. Your offset will be 8% of the net amount, up to $1,000. Here’s how the calculations are done:

small business tax offset calculation
Source: ato.gov.au

The offset amount will be shown separately on your notice of assessment.

It’s important to also do your research. There are a number of income amounts that actually aren’t included when working out your small business net income. Some of these include your net capital gains from running a business, salary and wages, Government allowances and pensions and much more.

At the same time, there are also deductions that aren’t used when working out net small business income. These can be tax-related expenses, such as accounting fees, gifts, donations or contributions, personal superannuation contributions and more.

small business tax help

Need Extra Help?

Running a small business is hard work, and sometimes you don’t have the money available to give it the boost it needs. A business loan could be the perfect option to tide you over until your cash flow increases, allowing you to take advantage of any opportunities that arise. Here are some of the reasons you might consider taking out a business loan:

  • Expansion: you may be looking at expanding your office, or even expanding your business into new markets. This takes capital which you may not have free.
  • Inventory: in order to sell products, you need to have them first. Sometimes you need an upfront cash injection to get the business off the ground.
  • Cash flow: you may be waiting on outstanding invoices to come in, but have expenses that need covering. A loan can help over this period.
  • Equipment: depending on your business, you may need particular equipment to help it run smoothly. This can be a big upfront cost to you.

Taking Out A Small Business Loan

While the small business tax offset is a great start, you may be looking for a bigger cash injection into your business. The team at ALC Commercial can help when it comes to taking out a business loan.

We understand that every business is different and can look to find a solution that suits your particular needs. Get in touch today and get access to the money you need to see your small business on the road to success.

For more information on business loans, commercial finance, debt consolidation, bad credit business loans and low-doc business loans talk to our experienced and understanding loan specialists to see how our business loans can support your business goals.

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