Income Tax Assessment Act 1997
View history note
Hide history notePt 2-20 inserted by No 56 of 1997.
Div 61 inserted by No 56 of 1997.
Subdiv 61-J repealed by No 23 of 2012, s 3 and Sch 1 item 3, applicable in relation to the 2012-13 income year and later income years. Subdiv 61-J formerly read:
Subdivision 61-J - 25% entrepreneurs ' tax offset
SECTION 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 small business entity with aggregated 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:
(a) whether your aggregated turnover is $50,000 or less or is more than $50,000; and (b) if you are an individual - whether you (and your spouse, if you have a spouse) have significant income from sources other than your small business. You may be entitled to more than 1 tax offset. For example, if you are an individual running your own small business, you may be entitled to a tax offset under section 61-505 . If you are also a beneficiary of a trust that is a small business entity, you may be entitled to a tax offset under section 61-520 .
Operative provisionsHistoryS 61-500 amended by No 56 of 2010, s 3 and Sch 4 item 1, by substituting the para beginning with " Your entitlement " , applicable in relation to assessments for income years that commence on or after 1 July 2009. The para formerly read:
Your entitlement to the offset varies depending on what kind of entity you are. The amount of your offset varies depending on whether your aggregated turnover is $50,000 or less or is more than $50,000.
S 61-500 amended by No 80 of 2007 , s 3 and Sch 3 items 121 to 124, by substituting " small business entity with aggregated turnover " for " business in the simplified tax system with annual group turnover " , substituting " your aggregated turnover " for " the annual group turnover " , substituting " individual running your own small business " for " individual STS taxpayer running your own business " and substituting " a small business entity " for " an STS taxpayer " , applicable in relation to the 2007-08 income year and later income years.
S 61-500 inserted by No 41 of 2005.
SECTION 61-505 25% entrepreneurs ' tax offset: individual or company
Entitlement
61-505(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 a *small business entity for the year; and
(c) your *aggregated turnover for the year is less than $75,000; and
(d) you have *net small business income for the year.HistoryS 61-505(1) amended by No 80 of 2007 , s 3 and Sch 3 items 125 to 127, by substituting " a *small business entity " for " an *STS taxpayer " in para (b), substituting " *aggregated turnover " for " *STS group turnover " in para (c) and substituting " *net small business income " for " *net STS income " in para (d), applicable in relation to the 2007-08 income year and later income years.
Amount
61-505(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 small business percentage ) using the formula:
Your * net small business
income for the year
Your taxable income for the year× 100 If that percentage is more than 100%, the small business percentage is 100%.
Step 4:If your *aggregated turnover for the year is $50,000 or less, multiply the amount at step 2 by the small business percentage: the result is the amount of your *tax offset.
Note:
If you are an individual, section 61-523 may reduce the amount of the tax offset.
Step 5:If your *aggregated turnover for the year is more than $50,000, work out the fraction (the small business phase-out fraction ) using the formula:
$ 75,000 − Your * aggregated turnover for the year $ 25,000 The amount of your *tax offset is worked out using the formula:
Step 2 amount × Small business percentage × Small business phase-out fraction Note:
If you are an individual, section 61-523 may reduce the amount of the tax offset.
Example:
A company runs a local sports business. The company is a small business entity for the year. The company ' s aggregated turnover for the year is $50,000, the company ' s net small business 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 small business percentage is:
$40,000
$80,000× 100 = 50% The amount of the company ' s tax offset (step 4) is:
$6,000 × 50% = $3,000 HistoryS 61-505(2) amended by No 56 of 2010, s 3 and Sch 4 items 2 and 3, by inserting the note at the end of steps 4 and 5 of the method statement, applicable in relation to assessments for income years that commence on or after 1 July 2009.
S 61-505(2) amended by No 80 of 2007 , s 3 and Sch 3 items 128 to 132, by substituting steps 3, 4 and 5 of the method statement, substituting " a small business entity " for " an STS taxpayer " in the example, substituting " aggregated turnover " for " STS group turnover " in the example, substituting " net small business income " for " net STS income " in the example and substituting " small business percentage " for " STS percentage " in the example, applicable in relation to the 2007-08 income year and later income years. Steps 3, 4 and 5 of the method statement formerly read:
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
$25,000The amount of your *tax offset is worked out using the formula:
Step 2 amount × STS
percentage× STS
phase-out
fraction
SECTION 61-510 25% entrepreneurs ' tax offset: partner in a partnershipHistoryS 61-505 inserted by No 41 of 2005.
Entitlement
61-510(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 a *small business entity for the year; and
(c) the partnership ' s *aggregated turnover for the year is less than $75,000; and
(d) the partnership has *net small business income for the year; and
(e) your assessable income for the year includes a share ( your net small business income share ) of that net small business income.HistoryS 61-510(1) amended by No 80 of 2007 , s 3 and Sch 3 items 133 to 136, by substituting " a *small business entity " for " an *STS taxpayer " in para (b), substituting " *aggregated turnover " for " *STS group turnover " in para (c), substituting " *net small business income " for " *net STS income " in para (d) and substituting all the words after " a share " in para (e), applicable in relation to the 2007-08 income year and later income years. The words after " a share " in para (e) formerly read:
( your net STS income share ) of that net income.
Amount
61-510(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 small business percentage ) using the formula:
Your net small business income
share
Your taxable income for the year× 100 If that percentage is more than 100%, the small business percentage is 100%.
Step 4:If the partnership ' s *aggregated turnover for the year is $50,000 or less, multiply the amount at step 2 by the small business percentage: the result is the amount of your *tax offset.
Note:
If you are an individual, section 61-523 may reduce the amount of the tax offset.
Step 5:If the partnership ' s *aggregated turnover for the year is more than $50,000, work out the fraction (the small business phase-out fraction ) using the formula:
$ 75,000 − The partnership ' s * aggregated turnover
for the year$ 25,000 The amount of your *tax offset is worked out using the formula:
Step 2 amount × Small business percentage × Small business phase-out fraction Note:
If you are an individual, section 61-523 may reduce the amount of the tax offset.
HistoryS 61-510(2) amended by No 56 of 2010, s 3 and Sch 4 items 4 and 5, by inserting the note at the end of steps 4 and 5 of the method statement, applicable in relation to assessments for income years that commence on or after 1 July 2009.
S 61-510(2) amended by No 80 of 2007 , s 3 and Sch 3 item 137, by substituting steps 3 , 4 and 5 of the method statement, applicable in relation to the 2007-08 income year and later income years. Steps 3, 4 and 5 of the method statement formerly read:
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
SECTION 61-515 25% entrepreneurs ' tax offset: trustee of a trustHistoryS 61-510 inserted by No 41 of 2005.
Entitlement
61-515(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 a *small business entity for the year; and
(c) the trust ' s *aggregated turnover for the year is less than $75,000; and
(d) the trust has *net small business 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 small business income share ) of that net small business income.HistoryS 61-515(1) amended by No 80 of 2007 , s 3 and Sch 3 items 138 to 141, by substituting " a *small business entity " for " an *STS taxpayer " in para (b), substituting " *aggregated turnover " for " *STS group turnover " in para (c), substituting " *net small business income " for " *net STS income " in para (d) and substituting all the words after " a share " in para (e), applicable in relation to the 2007-08 income year and later income years. The words after " a share " in para (e) formerly read:
( your net STS income share ) of that net STS income
Amount
61-515(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 small business percentage ) using the formula:
Your net small business
income share
The *net income of the trust
for the year× 100 If that percentage is more than 100%, the small business percentage is 100%.
Step 4:If the trust ' s *aggregated turnover for the year is $50,000 or less, multiply the amount at step 2 by the small business percentage: the result is the amount of your *tax offset.
Step 5:If the trust ' s *aggregated turnover for the year is more than $50,000, work out the fraction (the small business phase-out fraction ) using the formula:
$ 75,000 − The trust ' s * aggregated turnover for
the year$ 25,000 The amount of your *tax offset is worked out using the formula:
Step 2 amount × Small business percentage × Small business phase-out fraction HistoryS 61-515(2) amended by No 80 of 2007 , s 3 and Sch 3 item 142, by substituting steps 3, 4 and 5 of the method statement, applicable in relation to the 2007-08 income year and later income years. Steps 3, 4 and 5 formerly read:
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
SECTION 61-520 25% entrepreneurs ' tax offset: beneficiary of a trustHistoryS 61-515 inserted by No 41 of 2005.
Entitlement
61-520(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 a *small business entity for the year; and
(c) the trust ' s *aggregated turnover for the year is less than $75,000; and
(d) the trust has *net small business income for the year; and
(e) your assessable income for the year includes a share ( your net small business income share ) of that net small business income.HistoryS 61-520(1) amended by No 80 of 2007 , s 3 and Sch 3 items 143 to 146, by substituting " a *small business entity " for " an *STS taxpayer " in para (b), substituting " *aggregated turnover " for " *STS group turnover " in para (c), substituting " *net small business income " for " *net STS income " in para (d) and substituting all the words after " a share " in para (e), applicable in relation to the 2007-08 income year and later income years. The words after " a share " in para (e) formerly read:
( your net STS income share ) of that net STS income.
Amount
61-520(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 small business percentage ) using the formula:
Your net small business
income share
Your taxable income
for the year× 100 If that percentage is more than 100%, the small business percentage is 100%.
Step 4:If the trust ' s *aggregated turnover for the year is $50,000 or less, multiply the amount at step 2 by the small business percentage: the result is the amount of your *tax offset.
Note:
If you are an individual, section 61-523 may reduce the amount of the tax offset.
Step 5:If the trust ' s *aggregated turnover for the year is more than $50,000, work out the fraction (the small business phase-out fraction ) using the formula:
$75,000 − The trust ' s *aggregated
turnover for the year$25,000 The amount of your *tax offset is worked out using the formula:
Step 2 amount × Small business
percentage× Small business
phase-out
fractionNote:
If you are an individual, section 61-523 may reduce the amount of the tax offset.
HistoryS 61-520(2) amended by No 56 of 2010, s 3 and Sch 4 items 6 and 7, by inserting the note at the end of steps 4 and 5 of the method statement, applicable in relation to assessments for income years that commence on or after 1 July 2009.
S 61-520(2) amended by No 80 of 2007 , s 3 and Sch 3 item 147, by substituting steps 3, 4 and 5 of the method statement, applicable in relation to the 2007-08 income year and later income years. Steps 3, 4 and 5 of the method statement formerly read:
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
HistoryS 61-520 inserted by No 41 of 2005.
SECTION 61-523 SECTION 61-523 25% entrepreneur ' s tax offset - reduction for non-small business income
61-523
Reduce the amount of your *tax offset worked out under subsection 61-505(2) , 61-510(2) or 61-520(2) by the amount worked out using the following formula (but not below nil), if:
(a) you are an individual; and
(b) the amount worked out using the formula is greater than nil:
Non-ETO small business
income for the income year− Threshold amount 5 where:
non-ETO small business income
for the income year is worked out by:
(a) adding up the following:
(i) your taxable income for the year;
(ii) your *reportable fringe benefits total for the year;
(iii) your *reportable superannuation contributions (if any) for the year;
(iv) your *total net investment loss for the year; and
(b) subtracting:
(i) in a case covered by subsection 61-505(2) - your *net small business income for the year; or
(ii) in a case covered by subsection 61-510(2) or 61-520(2) - your net small business income share for the year (within the meaning of paragraph 61-510(1)(e) or 61-520(1)(e) , whichever is applicable); and
(c) adding the following in relation to each individual (if any) who, on the last day of the year, is your *spouse:
(i) your spouse ' s taxable income for the year;
(ii) your spouse ' s reportable fringe benefits total for the year;
(iii) your spouse ' s reportable superannuation contributions (if any) for the year;
(iv) your spouse ' s total net investments loss for the year.Note:
ETO is short for 25% entrepreneurs ' tax offset.
threshold amount
means:
(a) $120,000 if:
(i) on any day during the income year, you have a dependant (within the meaning of the definition of dependant in subsection 159P(4) of the Income Tax Assessment Act 1936 , disregarding paragraph (a) (spouse) of that definition); or
(ii) on the last day of the income year, you have a *spouse; or
(b) otherwise - $70,000.SECTION 61-525 Meaning of net small business income and small business entity turnoverHistoryS 61-523 inserted by No 56 of 2010, s 3 and Sch 4 item 8, applicable in relation to assessments for income years that commence on or after 1 July 2009.
Net small business income
61-525(1)
An entity ' s net small business income for an income year is the amount by which the entity ' s *small business entity turnover for the year is more than the sum of the entity ' s deductions attributable to that turnover.
Small business entity turnover
61-525(2)
An entity ' s small business entity turnover for an income year is the total *ordinary income that the entity *derives in the income year in the ordinary course of carrying on a *business.
61-525(3)
In working out an entity ' s *small business entity turnover for an income year, do not include any amount that is *non-assessable non-exempt income under section 17-5 (which is about GST).
HistoryS 61-525 substituted by No 80 of 2007 , s 3 and Sch 3 item 148, applicable in relation to the 2007-08 income year and later income years. S 61-525 formerly read:
SECTION 61-525 Meaning of net STS income and STS annual turnover
Net STS income
61-525(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
61-525(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.
61-525(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.
61-525(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.S 61-525 inserted by No 41 of 2005.
Subdiv 61-J inserted by No 41 of 2005.
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