From the financial year 2015-2016, individual taxpayers with taxable income are eligible to reduce the tax payable up to $1000 per year. The tax offset is relating to their part of income, who is a:
• Net small business taxable income derived as a sole trader
• Share of small business taxable income derived as a partner or trust less any deductions attributable to your share
The income tax offset will be 5% of your small business income amount up to the limit of $1000 each year.
What is a small business?
In Australia, ASIC (Australian Securities & Investment Commission) defines ‘small proprietary companies’ as the following conditions:
• Annual revenue less than $25 million
• Fewer than 50 employees
• Consolidated gross assets of less than $12.5 million
If the company satisfies two out of three characteristics, it is regarded as a small business entity.