Tax Info - Small Business Entity Provisions

The Small Business Entity Provisions formerly Simplified Tax System (STS) is an alternative method of determining taxable income for eligible small businesses with straightforward financial affairs. Participation  is optional.

Features of the provisions are:

• Cash accounting rather than accruals accounting:
  • Most business income and deductions will be recognised only when they are received and paid.
• A simplified depreciation system (capital allowances): 
  •  Depreciating assets that cost less than $1000 each will be written off immediately and claimed as a deduction in the year in which you started to use the asset, or installed it ready for use, for a taxable purpose.
  • Other depreciating assets which have an effective life of less than 25 years will be pooled in a General Pool and depreciated at the diminishing value rate of 30%.
  • Depreciating assets with an effective life of 25 years or more will be pooled in a Long Life Pool and depreciated at the diminishing value rate of 5%.
• A simplified treatment of trading stock:
  • Taxpayers will only be required to account for changes in their trading stock on hand or do stocktaking at the end of the year where the difference between the value of opening stock and your reasonable estimate of closing stock exceeds $5000.

To be eligible for the SBE provisions in an income year you must satisfy the following three tests:

• Be carrying on a business in that year; and
• Have an average turnover for that year of less than $2m; and
• The total of the adjustable values of the depreciating assets held by you and your grouped entities at the end of that year must be less than $6m.

See the Small Business Entity Provisions homepage at the ATO website for more information.