What the small business tax break actually does

Table of Contents
    Add a header to begin generating the table of contents

    Check out this post about COVID-19 ATO Updates in Australia.

    What the small business tax break actually does

    The new immediate tax deduction for small businesses has been welcomed by most, but what some people may not know, what the government doesn’t collect now, will collect later.

    The new law was announced by the Federal Government that it would now allow small businesses with a turnover less than $2 million to immediately deduct the value of an asset purchased, up to $20,000. The cost of this new accelerated depreciation scheme is estimated to be $1.75 billion over the next four years.

    This new rule doesn’t really change anything about the eligibility for the deductions of the assets; it simply changes how quickly a small business can realise the tax deduction.

    For example, under the current simplified rules an asset costing $2000 would be depreciated at 15% for the first year, and then 30% each year after that until the total value of $2000 is reached.

    If a small business buys an asset like a car for $20,000 under the new rule the entire $20,000 can be deducted in the first year. (Instead of only $3000 the first year, etc)

    Most small business fall into two categories – Sole Trader/Partnerships or companies that are incorporated. The taxable profits for incorporated companies are currently taxed at a flat rate of 28.5%. (With the 1.5% tax cut in place)

    Unincorporated businesses do not get the 1.5% tax cut, but instead will receive a tax discount of 5% of their business income, up to $1000 per year.


    If you have any questions about this right off an how it may affect you please give our office a call. Our Caulfield tax agents and accountants at Hillyer Riches are always happy to help you with any of your small business or individual tax needs.



    Hillyer Riches Management Pty Ltd is a Corporate Authorised Representative (No 466483) of Capstone Financial Planning Pty Ltd. ABN 24 093 733 969. AFSL / ACL No. 223135.This document contains general advice only and is not personal financial or investment advice. Also, changes in legislation may occur frequently. We recommend that our formal advice be obtained before acting on the basis of this information.


    Original article sourced from:  David Bond, Senior Lecturer, Accounting Discipline Group at University of Technology, Sydney and Anna Wright, at University of Technology, Sydney.


    Scroll to Top