The ATO provides a range of tax concessions for businesses with an aggregated annual turnover under $10 million — classified as a Small Business Entity (SBE). These concessions are designed to reduce compliance burden and improve cash flow. They include simplified depreciation rules, trading stock concessions, income tax rate reductions (for companies), CGT concessions, and access to the instant asset write-off.
Am I a Small Business Entity?
To access most small business concessions, your business must:
- Be an entity that carries on a business in Australia, AND
- Have an aggregated annual turnover of less than $10 million
Aggregated turnover includes your own turnover plus the turnover of any connected entities or affiliates (entities you control or that control you). This prevents large business groups from accessing small business concessions through subsidiary structures.
1. Simplified Depreciation and Instant Asset Write-Off
The most significant and widely used small business tax concession is the instant asset write-off, which allows eligible businesses to immediately deduct the cost of depreciable assets (rather than depreciating them over several years).
Current Rules — FY2024–25 and FY2025–26
For FY2024–25, the instant asset write-off threshold is $20,000 per asset for small businesses with turnover under $10M. Assets costing $20,000 or more are depreciated through a small business pool rather than written off immediately.
Note: The instant asset write-off threshold has changed significantly over recent years. See Instant Asset Write-Off — Current Rules for the latest threshold and conditions.
Small Business Depreciation Pool
Assets that cost $20,000 or more (and therefore cannot be immediately written off) are added to the small business pool. The pool is depreciated at:
- 15% in the first year (half-year rule applies)
- 30% in subsequent years
If the pool balance falls below $1,000 at year end, the entire remaining balance can be written off.
2. Trading Stock Concessions
Small businesses can use a simplified trading stock assessment if the value of trading stock changes by less than $5,000 during the year. In that case, you do not need to do a formal stocktake or opening/closing stock adjustment — you can treat trading stock as if it has not changed. This saves the time and cost of year-end stock valuation.
3. PAYG Instalment Concession
Small businesses can opt into the GDP-adjusted instalment method for PAYG instalments. The ATO calculates a fixed quarterly amount adjusted by GDP growth factor. This simplifies quarterly tax obligations and avoids complex instalment income calculations.
4. GST — Annual Apportionment and Cash Accounting
Small businesses registered for GST can access:
- Cash basis accounting — report GST when you receive payment (not when you issue an invoice), which helps with cash flow
- Annual apportionment for input-taxed supplies — rather than apportioning input tax credits monthly, you can make a single annual adjustment
5. Fringe Benefits Tax (FBT) Concessions
Small businesses with turnover under $10M can use the 50/50 split method for meal entertainment fringe benefits, simplifying the FBT calculation.
6. Small Business CGT Concessions
When a small business (or its owners) sells a business asset, four CGT concessions may be available — separate from and additional to the standard 50% CGT discount for assets held over 12 months:
| Concession | Effect |
|---|---|
| 15-year exemption | Full CGT exemption if the business asset was owned for 15+ years and the owner is aged 55+ retiring, or permanently incapacitated |
| 50% active asset reduction | Reduces the capital gain by 50% (on top of the general 50% discount, potentially reducing the taxable gain to 25% of the gross gain) |
| Retirement exemption | Exempts up to $500,000 of capital gains (lifetime limit) if the proceeds are contributed to super or the owner is under 55 and contributes to super |
| Rollover | Defers the capital gain for 2 years (or until a replacement asset is acquired), allowing business restructuring without an immediate tax bill |
To access these concessions, the business must satisfy either the $10M turnover test or the $6M net asset value test.
7. Pay As You Go (PAYG) Withholding — Simplified W-Variation
Small businesses can apply to vary the amount of PAYG withholding from directors’ wages more easily than larger businesses.
8. Company Tax Rate
Companies with aggregated turnover under $50 million that are base rate entities pay the base rate of 25% (rather than the standard 30% corporate tax rate). Small businesses under $10M are well within this concession.
How to Access Small Business Concessions
Most concessions are accessed by:
- Making an election in your tax return (some concessions require a specific election)
- Meeting the turnover test each year (aggregated turnover must be recalculated annually)
- Ensuring associated entities’ turnovers are included in the $10M calculation
Your accountant or tax agent can confirm which concessions your business qualifies for and help you make the correct elections.
Related Articles
- Instant Asset Write-Off — Current Rules
- Capital Gains Tax Small Business Concessions
- Sole Trader Tax Australia
- GST and Business Tax hub
Frequently Asked Questions
Do I need to apply for small business entity status? No. If your aggregated turnover is under $10 million, you are automatically eligible for the SBE concessions. You simply need to elect to use each concession in your tax return.
Can a trust access small business tax concessions? Yes. Trusts that carry on a business and have aggregated turnover under $10M are eligible. However, the connected entity and affiliate rules can be complex for trust structures. Seek advice from a registered tax agent.
Do the small business CGT concessions apply to shares in a company? Shares in a company can qualify as an active asset if the company’s assets are predominantly active business assets (not passive investments). The rules are complex — the business real property test, goodwill, and other asset tests apply. This is an area where specialist CGT advice is important.
This article provides general tax information. Small business concession eligibility rules are complex and may change following budget announcements. For advice tailored to your situation, speak with a registered tax agent. Find one through the Tax Practitioners Board register.