Small Business Income Tax Offset

Some 96% of all Australia’s businesses are small businesses, employing over 4.5 million people and producing over $330 billion of economic output per year. Australians start over 280,000 new businesses every year.

As small businesses drive growth and create jobs, the small business income tax offset was announced in the 2015 Government budget to encourage and reward small business owners. Effective from 1st July 2015 individuals operating an unincorporated business that has an annual turnover of less than $2 million are eligible for a small business tax discount.

Unincorporated businesses are businesses that do not possess a separate legal entity from its owners. Generally the owners bear full legal liability for any action or debts of the business. Unincorporated businesses include sole traders, partnerships and trusts.

The small business tax discount is 5% of the income tax payable on the business income received by individual taxpayers whether trading as a sole trader, partner in a partnership, or beneficiary of a trust operating a business. It is structured as a small business income tax offset (SBITO) and is limited to a maximum amount of $1,000 per annum.