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Small business income tax offset

What is the maximum small business tax offset?

The annual small business tax offset — also known as an unincorporated small business tax discount — is 16% of your aggregated turnover, with a maximum offset of $1,000. The ATO calculates your offset entitlement based on your tax return.

Who can claim the small business tax offset?

If you’re a sole trader, a partner in a partnership or a beneficiary of a trust, and your aggregated turnover is less than $5 million, you may be eligible for the small business tax offset. The tax offset isn't available to companies.

How do I calculate my small business tax offset?

The ATO offers a small business income tax offset calculator to help you work out the amount you need to enter in your tax return for ‘net small business income’. The ATO then calculates your offset amount based on the information you supply in your tax return. 

Your net small business income is the sum of your assessable income from carrying on your business, less any eligible deductions. 

Sole traders

When calculating your net small business income, you can include the following: 

  • net foreign business income related to your business

  • farm management deposits claimed as a deduction

  • repayments of farm management deposits included as income 

  • Other income or allowable deductions that arise while carrying on your business

Income and deductions you can’t claim include:

  • net capital gains from your business

  • salary and wages

  • director’s fees and allowances (including government allowances)

  • interest you earned on a farm management deposit

  • interest and dividends unrelated to business activity

  • tax-related expenses, such as accounting fees

  • tax losses for prior years.

For further detail, see ‘what to include in your net small business income’.

Partners and trust beneficiaries

Information you’ll need to gather before using the calculator includes:

  • statement of distribution or advice from the partnership or trustee

  • allowable deductions for your share of income 

  • farm management repayment statements

  • details of any other income as a beneficiary or partner.

Small business income tax offset eligibility FAQs 

If my aggregated turnover exceeds $5 million, am I ineligible for the small business income tax offset? 

Yes, in this case your annual aggregated turnover doesn’t meet the small business income tax offset eligibility criteria.  However, you may be eligible for other types of tax concessions — your accountant or tax agent can help you with this.

What’s the difference between annual turnover and aggregated turnover? 

Annual turnover is the income from running your business. Aggregated turnover is the annual turnover of your business, plus turnover from any entities that are affiliates of yours or any entities connected with you for that part of the income year.  

Here’s an example: If you’re a sole trader with an annual turnover of $100,000 and you earned $20,000 through a separate partnership (an entity you’re connected with), your aggregated turnover is $120,000.

Who can and can’t use the small business income tax offset calculator?

This calculator can be used by individuals who are carrying on small business entities, such as sole traders. It can also be used by individuals who are assessed on the income of small business entities, such as partners in a partnership and beneficiaries of a trust. 

The calculator can’t be used by partnerships or trusts, trustees on behalf of beneficiaries and minor beneficiaries (under 18 years old).

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