Making the most of small business tax breaks

There are a number of small business tax breaks that it pays to be aware of as the end of financial year approaches.

We have compiled this brief overview to give you an idea about whether any of these will be beneficial to your business:

Trading stock

Small businesses can opt out of doing an end of year stocktake (which can be expensive) if the value of their trading stock has not gone up or down by more than $5000 in the past financial year.

Simplified depreciation

Small businesses can immediately write off the value of business assets that were less than $1000. The depreciation on assets valued at over $1000 can be calculated as a single pool that depreciates at 15% in the first year and 30% every year after that.

However, there are some assets that are excluded from the simplified depreciation rules. Businesses that are using the simplified depreciation should seek advice on any assets that may require a different method of calculating depreciation.

CGT concessions

There are four CGT tax concessions available to small businesses that can be extremely effective in minimising, or even eliminating, CGT liability. These concessions are:

• The retirement exemption: Available to small business owners over the age of 55, or when the capital gain is contributed to a superannuation account

• The 15 year exemption: Available to retiring small business owners who have held the asset for over 15 years

• The 50% active asset reduction: Where an asset is considered to be ‘active’ the CGT liability may be reduced by 50% (the requirements here are complex and it is advisable to seek professional advice)

• The CGT rollover: If a business asset is disposed of and the business plans to purchase a similar replacement asset, then the CGT bill may be deferred for at least two years

There are specific rules about the order that these CGT concessions should be applied. It is advisable to seek professional advice before disposing of an asset.