The Government has been working its small business base hard. As they say; “small business votes”, and the changes are already in force, keeping them out of the Budget limelight.
Last October, concessions on capital gains tax for small business owners helped them keep any capital gains on sale of their businesses, reducing the tax to a quarter of the usual rate. A further reduction to zero can be achieved by putting the last quarter into super, up to a $500,000 lifetime limit.
But it’s SBITO (Small Business Tax Offset) which gives a little more after-tax cash every year. At the moment, a SBITO “small business” is one with turnover under $5 million.
Putting it in context: the employees of the business have LITO and LAMITO offsets which deliver a maximum of $810 at $48,000 and decline slowly after that, to zero.
SBITO adds an extra $1000 on top of this. Where the unincorporated small business owner lives entirely off their small business incomes, they get the maximum benefit once their net profits exceed $67,000.
It fades in before that, lifting marginal rates for business owners by 1.5 per cent, (but not as harshly as the Medicare fade-in). It does not decline, flatlining all the way to infinity.
Like most small business concessions, this one comes with lots of integrity measures to stop it being gamed by micro businesses who may only get a share of the action. It’s been in force since 2015.
Each year, the point where the full $1000 kicks in drops, and costing the taxpayer a little bit more as more people benefit and more receive more. By 2021 the point where the maximum benefit applies will be down to the $48,000 “sweet spot”, making it especially nice, unless Treasurer Josh Frydenberg fiddles with the tax brackets next Tuesday.
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