Small business tax breaks and deductions

Completing your business tax return

The tax benefits for small businesses are constantly changing. Here are some of the things to consider when you’re completing your business tax return.

Small business support

The government has announced a temporary increase to the instant asset write-off limit for small businesses, opens in new window, raising it from $1,000 to $20,000 for the 2024-25 financial year. This measure, announced in the 2024-25 Budget, allows eligible small businesses with an annual turnover of less than $10 million to deduct the full cost of eligible depreciating assets under $20,000 that are first used or installed between 1 July 2024 and 30 June 2025.

This $20,000 limit applies per asset, meaning eligible businesses can write off multiple assets instantly. Assets costing $20,000 or more will still be added to the simplified depreciation pool and depreciated over time. If your pool balance is under $20,000 at the end of the 2024-25 income year, it can be written off in full.

This measure is intended to provide financial relief and encourage investment in equipment and tools for small businesses. For more information, visit the ATO website and speak with a registered tax agent or accountant to understand how these changes apply to your circumstances.

Are there any new small business tax deductions?

Allowable tax deductions change from time to time and, in some cases, the changes can be quite substantial. For example, to help businesses where employees were forced to work from home by COVID-19, the Government introduced claims for extra home-based business expenses. Anyone left with unsold and unsellable stock as a result of the pandemic or bushfires could also claim a tax deduction on the losses. So it always pays to check for new opportunities to claim, particularly if there has been a major impact on your business that was beyond your control.

Can you claim for business loans and bad debts?

You may be able to claim any fees and interest charges associated with a business loan as a small business tax deduction. You may also be able to claim for unpaid invoices if the outstanding debts were included in your assessable income in the current or previous financial year, and you write them off before June 30.

Are you entitled to a small business income tax offset?

The small business tax offset, also known as the unincorporated small business tax discount, has been reducing the tax paid by some small businesses by as much as $1,000 each year. It was introduced for sole trader or people who have a share of net small business income from a partnership or trust. You’ll find more information on the ATO website about small business income tax offset, opens in new window.

Other tax breaks for small businesses

As a small business owner, you may have access to a range of tax concessions related to income tax, capital gains tax, GST, PAYG and fringe benefits tax.

The ATO website is updated every year with the latest tax information, opens in new window. It’s also vital that you discuss your individual situation with a professional, so you don’t miss out on possible savings or claim deductions for things you’re not eligible for. 

Small business energy incentive

The small business energy incentive aims to assist businesses in enhancing energy efficiency and reducing their energy costs. Businesses with an annual turnover of less than $50 million can benefit from an additional 20% tax deduction on eligible assets and improvements that promote more efficient energy usage.

See Small business energy incentive, opens in new window for further information.

Small business skills and training boost

Small businesses with an annual turnover of less than $50 million can benefit from an additional 20% tax deduction on eligible expenditure for external training courses provided to employees by registered training providers. This incentive applies to eligible expenses incurred between 7:30 pm AEDT on 29 March 2022 and 30 June 2024.

See Small business skills and training boost, opens in new window for further information.

Reduced corporate tax rate of 25%

The corporate tax rate for base rate entities has been reduced to 25% since financial year 2021-22. Other available concessions may include small business CGT concessions, deductions for primary producers and special professionals and tax offsets for loss carry back.

See Business offsets and rebates, opens in new window for further information.

Small business annual tax offset up to $1,000

The small business income tax offset, also known as the unincorporated small business tax discount, can reduce the tax you pay by up to $1,000 each year. The offset is calculated based on the proportion of tax payable on your business income.

See Small business income tax offset, opens in new window for further information.

Managing tax obligations during financial hardship

ATO payment plans for struggling businesses

If your business is facing financial hardship, you may be able to set up a payment plan through the Australian Taxation Office (ATO) payment plans, opens in new window.

These plans offer a structured and manageable way for businesses to manage their tax obligations without facing the immediate burden of lump-sum payments. By allowing deferred or instalment-based payments the ATO provides businesses with the flexibility to manage their cash flow effectively while still staying compliant with tax regulations.

Eligibility for a payment plan depends on your specific circumstances including the type and amount of debt. Interest may apply and conditions can vary. Businesses are encouraged to speak with a registered tax agent or contact the ATO directly to discuss their options.

Tax relief and deferral options for businesses experiencing cash flow issues

The Australian Taxation Office (ATO) recognises the challenges that businesses face, particularly during periods of financial strain. To alleviate these pressures, the ATO may also provide relief in the form of deferred due dates, flexible payment options or remission of penalties and interest for businesses encountering cash flow difficulties. These initiatives include extending deadlines for tax payments, allowing businesses to defer certain tax obligations and providing temporary relief from certain tax liabilities.

By accessing available support, businesses may be able to better manage their finances, ensuring they can allocate resources towards maintaining operations and supporting their workforce while planning for a stable financial future. Such measures are crucial for sustaining businesses through tough times and aiding their eventual recovery.

Early access to superannuation and its tax implications

Accessing your super early is allowed in limited circumstances and must be approved by the ATO or your super fund. While early access to superannuation may provide temporary financial relief for individuals facing severe hardship or unexpected expenses. However, it is important to be aware of the potential tax implications. Withdrawals from superannuation accounts are generally taxed, depending on your age and the tax components of your superannuation balance.

For those under the preservation age, the taxable component of their superannuation withdrawal is generally taxed at the marginal tax rate, with a possible additional tax of up to 22%. For individuals above the preservation age but under 60, the taxable portion is taxed at marginal rates but with a lower cap. After the age of 60, most superannuation benefits are typically tax-free.

Before making a decision, we encourage you to seek professional advice. You can also visit the ATO website, opens in new window for further information.

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