For the 2020/21 year, the reduced corporate tax rate has been reduced to 26%, down from 27.5%, eligibility for the reduced corporate tax rate remains unchanged and applies to base rate entity companies with an aggregated turnover of less than $50m.
The lower company tax rate for base rate entities will reduce to 26% in 2020–21 and to 25% for the 2021–22 income year.
Small Business Income Tax Offset
The small business income tax offset has been increased to 13%, up from 8%. The tax offset is a 13% discount of the income tax payable on the business income received from a small business entity (other than a company) with an aggregated turnover of less than $5m, up to a maximum of $1,000 a year.
Expanded access to small business concessions
From 1 July 2020, businesses that are not small businesses because their turnover is $10 million or more but less than $50 million can also access an immediate deduction for certain start-up expenses and for prepaid expenditure.
From 1 July 2021, businesses that are not small businesses because their turnover is $10 million or more but less than $50 million can also access these small business concessions:
- simplified trading stock rules; and
- PAYG instalments concession; and
- a two-year amendment period; and
- excise concession.
Temporary Full Expensing of Assets
From 7.30 pm AEDT on 6 October 2020 until 30 June 2022 the temporary full expensing allows:
- Eligible business entities with an aggregated turnover less than $5 billion or corporate tax entities that satisfy the alternative test can immediately expense the cost of eligible new depreciating assets.
- Eligible businesses with an aggregated turnover under $50 million can immediately expense the business portion of the cost of eligible second-hand assets for
- Businesses with an aggregated turnover under $10 million can immediately expense the balance of a small business pool at the end of each income year in the period.
Accelerated Depreciation Turnover less than $500m
An immediate deduction is available for entities with an aggregated turnover of less than $500m for assets first used or installed ready for use between 12 March 2020 until 30 June 2021, and purchased by 31 December 2020, cost less than $150,000 up from $30,000
The balance of the general small business pool is also immediately deducted if – the balance is less than $150,000 on 30 June.
- The threshold reverts to $1,000 from 1 July 2021.
If you have any questions whether these measures impact on you or if you can benefit from them, just contact us for a FREE Financial Health Check to get peace of mind.
Source: Australian Taxation Office
Please Note: Many of the comments in this publication are general in nature and anyone intending to apply the information to practical circumstances should seek professional advice to independently verify their interpretation and the information’s applicability to their particular circumstances.