Simplified Tax System for small business is an oxymoron

There is a new kid in town. His name is Base Rate Entity. Guess what - he doesn’t replace the other definitions or acronyms because this is a new definition for small business. Buckle up and I’ll try to explain it:

Base Rate Entity (BRE) - applies from 1 July 2017

If your turnover is less than $25 million then you are an BRE. If you qualify, this is what you’re entitled to:

  • simpler depreciation and a $20,000 immediate tax write off
  • a company tax rate cut (but only if you’re conducting a business) of 27.5%
  • if you’re a primary producer - immediate deduction for fences and a three year write-off for fodder storage assets
  • immediate write-off for the expenses incurred to start a business
  • rollover relief if you change business structure
  • simplified trading stock rules if your stock value does not vary by $5,000 from year to year
  • an immediate write-off for prepaid expenses where the payment covers the 12 month period
  • and my favourite - a two year amendment period from the time the Commissioner issues an assessment
  • GST accounting on a cash basis (note, cash basis accounting only applies to GST and not income tax)
  • annual apportionment of GST where you can claim the full amount of GST on private purchases and make an adjustment at the end of the financial year
  • fringe benefits tax (FBT) concession for multiple tax-deductible devices provided to employees
  • super concessions which enable you to use the small business clearinghouse

Unfortunately, the BRE definition does not apply to the small business capital gains tax exemptions. This was a benefit provided to small businesses where they could effectively sell their business either tax-free or substantially tax-free. The turnover remains at $2 million for this concession.

For further details contact Dene Kilpatrick

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