Small Business Entities

Small Business Entities have an alternative way to determine taxable income that applies to whole income years. Participation is optional and the rules are designed to reduce the tax and compliance costs for small businesses, enabling you to claim a full deduction for certain prepaid expenses.

There are two main Small Business Entity rules:

• Simplified depreciation rules — Most depreciating assets that cost less than $1,000 each are written off. Most other depreciating assets are pooled and deducted at 30% or 5% depending on their effective life.
• Simplified trading stock rules — Businesses only need to conduct stock takes and account for changes in the value of trading stock in limited circumstances.

To qualify for Small Business Entity in an income year you must:

• Run a business in that year
• Have an aggregated turnover of less than $2 million for that year and the previous year

For more information, see the Small business entity concessions essentials section of the ATO website.