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Small business entity concessions

Eligibility for small business entity concessions, simplified depreciation rules and rollover relief.

Last updated 1 July 2024

Eligibility

Small business entities may qualify for a range of tax concessions. You are a small business entity for an income year if:

  • you carry on a business in that year, and
  • you have an aggregated turnover of less than $10 million.

The aggregation rules use the concepts of ‘connected with’ (which is based on control) and ‘affiliates’ to determine whether the turnover of any related business needs to be included in the aggregated turnover of your business.

Businesses that are not small businesses because their aggregated turnover is $10 million or more but less than $50 million can also access an immediate deduction for certain start-up expenses and for prepaid expenditure.

If you're a small business entity you may be eligible to other small business deductions such as the following.

Small business energy incentive

The Treasury Laws Amendment (Support for Small Business, Charities, and other Measures) Act 2024External Link provides businesses with an aggregated annual turnover of less than $50 million with access to a bonus deduction equal to 20% of the cost of eligible assets or improvements to existing assets that support more efficient energy use.

This is a temporary measure to support these businesses to improve their energy efficiency and save on energy bills. The bonus deduction applies to the cost of eligible assets and improvements up to a maximum amount of $100,000 with the maximum bonus deduction being $20,000.

For more information, go to Small business energy incentive.

Simplified depreciation rules

If you are an eligible small business entity, you may choose to calculate deductions for your depreciating assets using these rules.

Small business entities can claim an immediate deduction for eligible depreciating assets under the instant asset write off.

Other depreciating assets are pooled in a general small business pool and deducted at the rate of 30%. Newly acquired assets are deducted at 15% (half the pool rate) in the first year, regardless of when they were acquired during the year.

The threshold at which a small business writes off the total balance of the general small business pool is aligned with the relevant instant write-off threshold.

There have been changes to the instant asset write-off threshold over recent years. See, Small business support – instant asset write off.

If you choose to use the simplified depreciation rules, you must:

  • use them to work out deductions for all your depreciating assets except those specifically excluded
  • apply the entire set of rules, not just individual elements (for example, you can't opt out of instant asset write off)
  • only claim a deduction for the portion of the asset used for business or other taxable purposes and not for the portion for private use.

If you don't want to apply the instant asset write-off, you need to opt out of the simplified depreciation rules for the 2023–24 income year. However, you must still deduct the balance of your small business pool in the income year you choose to opt out of the simplified depreciation rules.

A small number of assets are excluded from the simplified depreciation rules and a car limit applies to the cost of passenger vehicles.

The 5-year 'lock out' rule that prevented small businesses from re-entering the simplified depreciation regime for 5 years after they opted out continues to be suspended until 30 June 2024.

For more information, see Simpler depreciation for small business.

Rollover relief

As part of the small business tax concessions, you may be able to defer any gain or loss resulting from a transfer of a depreciating asset between entities with the same economic ownership under the small business restructure rollover concessions, which apply from 1 July 2016.

Modifications, under the Commissioner's remedial power, may apply to the asset disposal to prevent unintended taxation consequences where:

  • a transfer takes place on or after 8 May 2018, and
  • the asset transferred satisfies conditions under a small business restructure rollover.

For more information, see:

Continue to: Certain start-up expenses immediately deductible

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