A few tips that small businesses should consider when preparing their tax returns are:
1. Check if you are applying the correct company tax rate;
2. Check if you are entitled to the small business income tax offset;
3. Check if you are entitled to a small business CGT concession;
4. Ensure that deductions are only claimed for business (not personal) expenses; and
5. Keeping the right records to support your claims.
Correct company tax rate
Companies will pay tax at the full rate of 30% or at the lower rate of 27.5% if certain eligibility requirements are met.
The ATO has published a useful table to help companies determine which tax rate is applicable.
Income year | Aggregated turnover threshold | Tax rate for base rate entities* under the threshold | Tax rate for all other companies |
2017–18 | $25m | 27.5% | 30.0% |
2018–19 to 2019–20 | $50m | 27.5% | 30.0% |
2020–21 | $50m | 26.0% | 30.0% |
2021–22 | $50m | 25.0% | 30.0% |
A base rate entity is a company that:
- has an aggregated turnover less than the aggregated turnover threshold – which is $50 million for the 2018-19 income year; and
- 80% or less of their assessable income is base rate entity passive income (eg corporate distributions, royalties, rent, interest income).
Tip! Small businesses should make sure whether the 30% rate or 27.5% rate applies to them.
More information on the changes to company tax rates here – https://www.ato.gov.au/