Income Tax Assessment Act 1997

Div 328 (heading) substituted by No 80 of 2007 , s 3 and Sch 3 item 1, applicable in relation to the 2007-08 income year and later income years. The heading formerly read:

Division 328 - STS taxpayers

Div 328 inserted by No 78 of 2001.

Subdiv 328-F inserted by No 114 of 2015, s 3 and Sch 1 item 1, applicable to assessments for the 2015-16 income year and later income years.

Former Subdiv 328-F repealed by No 80 of 2007 , s 3 and Sch 3 item 85, applicable in relation to the 2007-08 income year and later income years. Subdiv 328-F formerly read:

Subdivision 328-F - Entities eligible to be STS taxpayers

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Subdiv 328-F inserted by No 78 of 2001.

SECTION 328-360 What this Subdivision is about  

This Subdivision explains that you can choose to be an STS taxpayer only if you are carrying on a business. In addition, you (and others who can be expected to act in concert with you in your business) together must have:

• an average annual business turnover of less than $1m; and

• depreciating assets with an end of year value below $3m.

You normally work out your average turnover using any 3 of the last 4 years, but there are special rules for some other cases.

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S 328-360 inserted by No 78 of 2001.

Operative provisions
SECTION 328-365 Eligibility to be an STS taxpayer  
328-365(1)
You are eligible to be an ^* STS taxpayer for an income year if:

(a) you carry on a ^* business in that year; and

(b) your ^* STS average turnover for that year is less than $1,000,000 (ignoring any ^* input tax credits to which you are entitled and ^* decreasing adjustments that you have); and

(c) the sum of the ^* adjustable values of the ^* depreciating assets (for which an amount can be deducted under Division 40 , or under this Division apart from this paragraph) that you, and entities (the grouped entities ) whose value of business supplies is grouped with yours in accordance with section 328-380 , ^* held at the end of that year is less than $3,000,000.

Note 1:

If you are eligible to be an STS taxpayer, you can choose to become one: see section 328-435 .

Note 2:

If you choose to become an STS taxpayer, you may be entitled to the 25% entrepreneurs ' tax offset: see Subdivision 61-J .

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S 328-365(1) amended by No 41 of 2005.

328-365(2)
You use the ^* closing pool balance of your, or your grouped entities, ^* general STS pool, ^* long life STS pool or low-value pool instead of the ^* adjustable values of the ^* depreciating assets allocated to it in working out whether paragraph (1)(c) applies to you.

Note:

You use the adjustable values of depreciating assets you hold that are not allocated to such a pool.

328-365(3)
This Subdivision applies to you as if you carried on a ^* business in an income year if:

(a) in that year you were winding up a business you previously carried on; and

(b) you were an ^* STS taxpayer for the income year in which you stopped carrying on that business.

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S 328-365 inserted by No 78 of 2001.

SECTION 328-370 Meaning of STS average turnover  
328-370(1)
Your STS average turnover for an income year (the present year ) is:

Sum of relevant STS group turnovers Number of averaging years

where:

number of averaging years
is:

(a) 3; or

(b) the number of years you take into account under paragraph (b) of the definition of sum of relevant STS group turnovers .

sum of relevant STS group turnovers
is:

(a) the sum of your ^* STS group turnovers for any 3 of the previous 4 income years; or

(b) if you did not carry on a ^* business in each of those last 4 years - the sum of your STS group turnovers for each of those years in which you carried on a business.

328-370(2)
For the purpose of working out your ^* STS average turnover under subsection (1) where you or a grouped entity carried on a ^* business for part only of one or more of those years, use a reasonable estimate of what your ^* STS group turnover would have been for that year or those years if you and the grouped entity had carried on a business throughout those years.

328-370(3)
You work out your STS average turnover for an income year (also the present year ) in this way if you are not eligible to be an ^* STS taxpayer for that year using subsection (1):

(a) work out your ^* STS group turnover for the present year or a reasonable estimate of it and a reasonable estimate for each of the 2 following income years (ignoring any of those years if you do not expect to be carrying on a ^* business at any time in that year); and

(b) work out the average of your ^* STS group turnovers for those years.

328-370(4)
For the purpose of working out your ^* STS average turnover under subsection (3) where you or a grouped entity carried on a ^* business for part only of the present year, use a reasonable estimate of what your ^* STS group turnover would have been for that year if you and the grouped entity had carried on a business throughout that year.

Example:

Kevin starts his locksmith business on 1 January 2002. He decides that he would like to enter the STS. He works out his STS average turnover for the income year as $420,000, calculated as follows:

• Kevin's estimated turnover for the period 1 January 2002 to 30 June 2002 is $200,000; and

• he estimates that, if he had been in business for the period 1 July 2001 to 31 December 2001, his turnover would have been $190,000, making a total of $390,000 for the year; and

• his estimated turnover for the 2002-03 year is $420,000, and the estimate for the 2003-04 year is $450,000.

The total STS turnover for the 3 years is $1,260,000, and the average for those years is $420,000. The value of Kevin's depreciating assets is $120,000. He is therefore eligible to be an STS taxpayer.

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S 328-370 inserted by No 78 of 2001.

SECTION 328-375 Meaning of STS group turnover  
328-375(1)
Your STS group turnover for an income year is the sum of:

(a) the ^* value of the ^* business ^* supplies you made in the income year; and

(b) the value of the business supplies made in the income year by grouped entities while they were grouped with you;

reduced by:

(c) the value of the business supplies you made in the income year to entities grouped with you while they were grouped with you; and

(d) the value of the business supplies entities grouped with you made in the income year to you while you were grouped with them; and

(e) the value of the business supplies another entity made in the income year to a third entity while the other entity and the third entity were grouped with you.

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S 328-375(1) amended by No 41 of 2005.

328-375(2)
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 group turnover.

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S 328-375(2) amended by No 41 of 2005.

328-375(3)
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.

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S 328-375(3) amended by No 41 of 2005.

328-375(4)
The regulations may provide that ^* STS group turnover is to be calculated in a different way, but only so that it would be less than the amount worked out under this section.

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S 328-375 inserted by No 78 of 2001.

SECTION 328-380 Grouped entities  
328-380(1)
The ^* value of the ^* business ^* supplies made in an income year by an entity is grouped with another entity ' s if:

(a) either entity controls the other entity in the way described in this section; or

(b) both entities are controlled in that way by the same third entity; or

(c) the entities are ^* STS affiliates of each other.

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S 328-380(1) amended by No 41 of 2005.

328-380(2)
This section applies to an entity that directly controls a second entity as if the first entity also controlled any other entity that is directly, or indirectly by any other application or applications of this section, controlled by the second entity.

Individuals, companies and fixed trusts

328-380(3)
An entity controls another entity if the first entity, its ^* STS affiliates or the first entity together with its STS affiliates:

(a) legally or beneficially own, or have the right to acquire the legal or beneficial ownership of, interests in the other entity that carry between them the right to receive at least 40% of any distribution of income or capital by the other entity; or

(b) if the other entity is a company - legally or beneficially own, or have the right to acquire the legal or beneficial ownership of, interests in the company that carry between them the right to exercise, or control the exercise of, at least 40% of the voting power in the company.

Non-fixed trusts

328-380(4)
An entity controls a trust that is not a ^* fixed trust if:

(a) the trustee has made a distribution, in any of the last 4 income years (except the present year) of $100,000 or more to the entity, its ^* STS affiliates or the entity together with its STS affiliates; or

(b) the entity, its ^* STS affiliates or the entity together with its STS affiliates:

(i) have the power, directly or indirectly, to obtain the beneficial enjoyment of any of the capital or income of the trust; or

(ii) are capable of gaining that enjoyment under a ^* scheme; or

(c) a trustee of the trust is accustomed or under an obligation (whether formal or informal), or might reasonably be expected, to act in accordance with the directions, instructions or wishes of the entity, its STS affiliates or the entity together with its STS affiliates.

Partnerships

328-380(5)
An entity controls a partnership if the entity, its ^* STS affiliates or the entity together with its STS affiliates have the right to at least 40% of the partnership net income, or have at least a 40% interest in assets used in the partnership ^* business (except assets that are leased to the partnership).

328-380(6)
A partnership (the first entity ) controls another entity if a partner in the first entity, or 2 or more partners in the first entity, have the right to receive at least 40% of the partnership net income, or have at least a 40% interest in assets used in the partnership ^* business, and:

(a) if the other entity is a company - the same partner, or the same 2 or more partners, have the right to receive at least 40% of any distribution of income or capital by the other entity, or to exercise, or to control the exercise of, at least 40% of the voting power in the company; or

(b) if the other entity is a ^* fixed trust - the same partner, or the same 2 or more partners, have the right to receive at least 40% of any distribution of income or capital by the other entity; or

(c) if the other entity is a trust that is not a fixed trust - a condition in a paragraph of subsection (4) is satisfied for the same partner, or the same 2 or more partners in relation to the trust; or

(d) if the other entity is a partnership - the same partner, or the same 2 or more partners, have the right to receive at least 40% of the partnership net income, or have at least a 40% interest in assets used in the partnership business, of the other entity.

328-380(7)
If the control percentage mentioned in this section is at least 40%, but less than 50%, then the Commissioner may determine that the first entity does not control the other entity if the Commissioner is satisfied, or thinks it reasonable to assume, that the other entity is controlled by an entity other than, or by entities that do not include, the first entity or any of its ^* STS affiliates.

328-380(8)
An entity is an STS affiliate of yours if the entity acts, or could reasonably be expected to act, in accordance with your directions or wishes, or in concert with you, in relation to the affairs of the entity ' s ^* business.

328-380(9)
Another partner in a partnership in which you are a partner is not your STS affiliate only because the partner acts, or could reasonably be expected to act, in concert with you in relation to the affairs of the partnership.

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S 328-380 inserted by No 78 of 2001.

Subdiv 328-F inserted by No 78 of 2001.

S 328-360(1)   amended by No 41 of 2017 (as amended by No 134 of 2018), s 3 and Sch 2 item 4, by substituting " 16% " for " 13% " , effective 1 July 2021 and applicable to the 2021-22 income year and later income years.

S 328-360(1) amended by No 41 of 2017 (as amended by No 134 of 2018), s 3 and Sch 2 item 3, by substituting " 13% " for " 8% " , effective 1 July 2020 and applicable to the 2020-21 income year and later income years.

S 328-360(1) amended by No 41 of 2017, s 3 and Sch 2 item 1, by substituting " 8% " for " 5% " , effective 1 July 2016 and applicable to the 2016-17 income year and later income years.

S 328-360(1) amended by No 52 of 2016, s 3 and Sch 3 items 20 and 21, by substituting para (b) and omitting " For the purposes of paragraph (b), disregard small business entities that are *corporate tax entities. " in the definition of " your total net small business income for the income year " , applicable to assessments for the 2015-16 income year and later income years. Para (b) formerly read:

(b) your share of a small business entity ' s net small business income for the income year that is included in your assessable income for the income year, less your deductions to the extent that they are attributable to that share and covered by section 328-370.

S 328-360 inserted by No 114 of 2015, s 3 and Sch 1 item 1, applicable to assessments for the 2015-16 income year and later income years.