Prepayment of Expenses

Certain prepayments are not subject to the above 12 month rule and therefore both SBE and non-SBE taxpayers may be able to claim deductions for expenditure that is:

less than $1,000 GST exclusive; or
incurred under a law of the Commonwealth, State, or Territory. Common examples are motor vehicle registration and compulsory third party insurance and Workcover premiums and statutory licences; or
paid under a contract of service (e.g. prepayments of salary and wages, bonuses and commissions).

Small Business Entity (SBE) Tax Concessions


The “small business entity” (SBE) tax rules provide access to a range of concessions that businesses can apply without the need to make a formal election in the tax return. A business can choose which one or all of the concessions to apply.

In order to be an SBE, the turnover of the business, including connected entities and affiliates, has to be less than $2 million GST exclusive.

The major tax planning concessions that are available under the SBE rules are:

The choice to continue to use the “cash accounting method” for recording income and expenses in the tax return where the business has continually used this method both prior to and after 1 July 2005;

The choice to adopt the simplified depreciation rules whereby an immediate deduction can be claimed for assets costing less than $1,000 GST exclusive. Depreciable assets costing $1,000 or more GST exclusive are included in an asset pool. A full depreciation deduction of 15% (30% thereafter) can be claimed for 2010 where the asset has an effective life of less than 25 years regardless of when the asset was acquired during the income year.

Choosing whether or not to do an end-of-year stock take if the value of trading stock has not increased or decreased by more than $5,000 over the income year.

Claiming an immediate deduction for certain prepaid business expenses where the payment covers a period of 12 months or less that ends in the next income year. Subject to cash flow requirements, the most common expenses that an SBE taxpayer should consider prepaying by 30 June 2014 include lease payments, interest, rent, business travel, insurances, business subscriptions, etc;

The ability to apply the small business capital gains tax concessions without the need to satisfy the $6M net asset

Small Business Tax

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Tax Planning Considerations for Businesses

Business owners should now be talking to their accountant about ways to legitimately reduce the tax bill for 2014.

Some tax planning techniques differ depending on whether the business is a “small business entity” and there are common strategies that should be considered prior to 30 June