2020/21 Tax Return: What is new for small Business?

1. Small business income tax offset for small business sole trader or for share of net small business income from a partnership or trust

• From year 2020/21 this offset has been increased to 13%, with a limit of $1000.
• The offset is available for small business with turnover less than $5 million.

2. Lower tax rate for companies that are base rate entities

From year 2020/21 tax rate for companies that are base rate entities has been further reduced to 26%.

For 2020/21, a base rate entity is a company that both:

• has an aggregated turnover of less than $50 million
• 80% of less of the company’s assessable income is passive income (such as interest, dividend or rental income)

3. Temporary full expensing of eligible new depreciating assets

• Available for businesses with aggregated turnover of less than $5 billon.
• Businesses must first hold the asset, and first use or install ready for use for a taxable purpose, between 7.30pm AEDT on 6 October 2020 and 30 June 2022
• Businesses can also immediately deduct the business portion of the cost of improvements to eligible depreciating assets

Business using simplified depreciation rules, can apply the temporary full expensing rules with some modifications. This includes deducting the balance of the small business pool at the end of an income year ending between 6 October 2020 and 30 June 2022.