The small business tax offset offered by the Australian government is designed to reduce your tax obligations as a business owner, helping you manage the financial burden of paying high taxes.
If you are a small business owner or sole trader that earns less than $5 million per year, you could be eligible for a reduction in your tax.
A tax incentive offered by the Australian government, the small business income tax offset (or the unincorporated small business tax discount), is designed to help businesses reduce their tax liabilities.
As a small business owner, you can reduce your tax payment by up to $1,000 yearly depending on whether you meet the criteria set out by the Australian Taxation Office (ATO). The offset is calculated based on the income tax payable on your business income.
Find out how your business is performing. Complete this short questionnaire to receive a free personalised Business Health Check report!
To be eligible for the tax offset you need to be a sole trader or have a share of small business income from a partnership or trust.
Your business must also earn a turnover of less than $5 million per year.
As of 2023, the offset rate is 16%, and the ATO can review and change the offset amount. The maximum offset you can claim as a small business owner is $1,000. The ATO works out how much you can claim based on the amounts shown in your tax return. You can work out your offset amount by visiting the ATO website.
To work out how much you could claim as a small business tax offset, you can use ATO’s calculator tool, which will give you an estimate based on the information you provide.
Before using the calculator, you’ll need to gather the following information:
For sole traders:
For business owners, partners or beneficiaries:
If you would like to work out your small business tax offset manually, you need to follow these steps:
Example:
0.16 (current business tax offset rate) x (small business taxable income) = small business tax offset.
Currently, the small business tax offset is capped at $1,000. If the amount calculated is higher than this, you will not receive more than $1,000.
As a small business owner, you might be familiar with your tax obligations and filing returns. Taking advantage of the small business tax offset can help to lower your taxes over the financial year, making your obligations more manageable.
If you want to file for the small business tax offset, Quickbooks can help by tracking your business income and expenses, making filing your tax returns simple.
Using the QuickBooks mobile app, you can set up reminders and alerts during the tax filing process, and generate reports on the go. This simplifies the process of filing the correct small business tax offset with the ATO and makes the end of the financial year a breeze.
Sign up for QuickBooks today and receive a 30-day free trial.
While every care has been taken to ensure the accuracy of the information presented as at 12 April 2024, Intuit is not providing you with professional advice and we recommend you obtain your own professional advice. Intuit is not liable for your use of the information presented.
Sign up for our quarterly newsletter and receive educational and interesting content straight to your inbox.
Want more? Visit our tools and templates!
