Tax Laws Amendment (2004 Measures No. 7) Act 2005 (41 of 2005)
Schedule 1 25% entrepreneurs' tax offset
Income Tax Assessment Act 1997
5 After Subdivision 61-I
Insert:
Subdivision 61-J - 25% entrepreneurs' tax offset
Guide to Subdivision 61-J
61-500 What this Subdivision is about
This Subdivision provides a 25% tax offset on your income tax liability related to the business income of a business in the simplified tax system with annual group turnover of less than $75,000.
Your entitlement to the offset varies depending on what kind of entity you are. The amount of your offset varies depending on whether the annual group turnover is $50,000 or less or is more than $50,000.
You may be entitled to more than 1 tax offset. For example, if you are an individual STS taxpayer running your own business, you may be entitled to a tax offset under section 61-505. If you are also a beneficiary of a trust that is an STS taxpayer, you may be entitled to a tax offset under section 61-520.
Table of sections
Operative provisions
61-505 25% entrepreneurs' tax offset: individual or company
61-510 25% entrepreneurs' tax offset: partner in a partnership
61-515 25% entrepreneurs' tax offset: trustee of a trust
61-520 25% entrepreneurs' tax offset: beneficiary of a trust
61-525 Meaning of net STS income and STS annual turnover
Operative provisions
61-505 25% entrepreneurs' tax offset: individual or company
Entitlement
(1) You are entitled to a *tax offset for an income year if:
(a) you are an individual or a company; and
(b) you are an *STS taxpayer for the year; and
(c) your *STS group turnover for the year is less than $75,000; and
(d) you have *net STS income for the year.
Amount
(2) The amount of your *tax offset is worked out in this way:
Method statement
Step 1. Work out your taxable income for the income year.
Step 2. Work out 25% of your basic income tax liability for the year (as worked out in step 2 of the method statement in subsection 4-10(3)).
Step 3. Work out the percentage (the STS percentage ) using the formula:
(Your net STS income for the year / Your taxable income for the year) * 100
If that percentage is more than 100%, the STS percentage is 100%.
Step 4. If your *STS group turnover for the year is $50,000 or less, multiply the amount at step 2 by the STS percentage: the result is the amount of your *tax offset.
Step 5. If your *STS group turnover for the year is more than $50,000, work out the fraction (the STS phase-out fraction ) using the formula:
($75,000 - Your STS group turnover for the year) / $25,000
The amount of your *tax offset is worked out using the formula:
Step 2 amount * STS percentage * STS phase-out fraction
Example: A company runs a local sports business. The company is an STS taxpayer for the year. The company's STS group turnover for the year is $50,000, the company's net STS income for the year is $40,000 and the company's taxable income for the year is $80,000.
The company is entitled to a tax offset.
The amount of the offset is worked out in this way:
The step 1 amount is $80,000.
The step 2 amount is $6,000: 25% of the company's basic income tax liability of $24,000 ($80,000 multiplied by the 30% company tax rate).
The step 3 STS percentage is:
(($40,000 / $80,000) * 100) = 50%
The amount of the company's tax offset (step 4) is:
$6,000 * 50% = $3,000
61-510 25% entrepreneurs' tax offset: partner in a partnership
Entitlement
(1) You are entitled to a *tax offset for an income year if:
(a) you are a partner in a partnership during the year; and
(b) the partnership is an *STS taxpayer for the year; and
(c) the partnership's *STS group turnover for the year is less than $75,000; and
(d) the partnership has *net STS income for the year; and
(e) your assessable income for the year includes a share ( your net STS income share ) of that net STS income.
Amount
(2) The amount of your *tax offset is worked out in this way:
Method statement
Step 1. Work out your taxable income for the income year.
Step 2. Work out 25% of your basic income tax liability for the year (as worked out in step 2 of the method statement in subsection 4-10(3)).
Step 3. Work out the percentage (the STS percentage ) using the formula:
(Your net STS income share / Your taxable income for the year) * 100
If that percentage is more than 100%, the STS percentage is 100%.
Step 4. If the partnership's *STS group turnover for the year is $50,000 or less, multiply the amount at step 2 by the STS percentage: the result is the amount of your *tax offset.
Step 5. If the partnership's *STS group turnover for the year is more than $50,000, work out the fraction (the STS phase-out fraction ) using the formula:
($75,000 - The partnership's *STS group turnover for the year) / $25,000
The amount of your *tax offset is worked out using the formula:
Step 2 amount * STS percentage * STS phase-out fraction
61-515 25% entrepreneurs' tax offset: trustee of a trust
Entitlement
(1) You are entitled to a *tax offset for an income year if:
(a) you are a trustee of a trust during the year; and
(b) the trust is an *STS taxpayer for the year; and
(c) the trust's *STS group turnover for the year is less than $75,000; and
(d) the trust has *net STS income for the year; and
(e) you are liable to be assessed under section 98, 99 or 99A of the Income Tax Assessment Act 1936 on a share ( your net STS income share ) of that net STS income.
Amount
(2) The amount of your *tax offset is worked out in this way:
Method statement
Step 1. Work out the *net income of the trust for the income year.
Step 2. Work out 25% of the amount of income tax you are liable to pay for the year on that *net income (apart from any *tax offsets).
Step 3. Work out the percentage (the STS percentage ) using the formula:
(Your net STS income share / The net income of the trust for the year) * 100
If that percentage is more than 100%, the STS percentage is 100%.
Step 4. If the trust's *STS group turnover for the year is $50,000 or less, multiply the amount at step 2 by the STS percentage: the result is the amount of your *tax offset.
Step 5. If the trust's *STS group turnover for the year is more than $50,000, work out the fraction (the STS phase-out fraction ) using the formula:
($75,000 - The trust's STS group turnover for the year) / $25,000
The amount of your *tax offset is worked out using the formula:
Step 2 amount * STS percentage * STS phase-out fraction
61-520 25% entrepreneurs' tax offset: beneficiary of a trust
Entitlement
(1) You are entitled to a *tax offset for an income year if:
(a) you are a beneficiary of a trust during the year; and
(b) the trust is an *STS taxpayer for the year; and
(c) the trust's *STS group turnover for the year is less than $75,000; and
(d) the trust has *net STS income for the year; and
(e) your assessable income for the year includes a share ( your net STS income share ) of that net STS income.
Amount
(2) The amount of your *tax offset is worked out in this way:
Method statement
Step 1. Work out your taxable income for the income year.
Step 2. Work out 25% of your basic income tax liability for the year (as worked out in step 2 of the method statement in subsection 4-10(3)).
Step 3. Work out the percentage (the STS percentage ) using the formula:
(Your net STS income share / Your taxable income for the year) * 100
If that percentage is more than 100%, the STS percentage is 100%.
Step 4. If the trust's *STS group turnover for the year is $50,000 or less, multiply the amount at step 2 by the STS percentage: the result is the amount of your *tax offset.
Step 5. If the trust's *STS group turnover for the year is more than $50,000, work out the fraction (the STS phase-out fraction ) using the formula:
($75,000 - The trust's STS group turnover for the year) / $25,000
The amount of your *tax offset is worked out using the formula:
Step 2 amount * STS percentage * STS phase-out fraction
61-525 Meaning of net STS income and STS annual turnover
Net STS income
(1) An entity's net STS income for an income year is the amount by which the entity's *STS annual turnover for the year is more than the sum of the entity's deductions attributable to that turnover.
STS annual turnover
(2) An entity's STS annual turnover for an income year is the sum of the *value of the business supplies the entity made in the year.
(3) To the extent that the *taxable supplies an entity makes in an income year includes *gambling supplies, use an amount equal to 11 times the entity's *global GST amount for those supplies rather than the *value of the business supplies in working out the entity's *STS annual turnover.
(4) In working out the *value of the business supplies made by an entity, disregard:
(a) any *supply made to the extent that the consideration for the supply is a payment or a supply by an insurer in settlement of a claim under an insurance policy; and
(b) to the extent that a supply is constituted by a loan - any repayment of principal, and any obligation to repay principal.