Updated April 2025

If you’re running a small business in Australia, you could be eligible for significant tax concessions and deductions that may substantially reduce your tax bill. These concessions and deductions are designed to help small businesses grow. Still, many business owners aren’t aware of all the benefits available to them. 

In this article, we outline the key tax concessions, offsets and deductions available to small business entities with an aggregated annual turnover under $10 million and those recently extended to businesses with turnover under $50 million. 

Who qualifies as a small business entity for tax concessions and deductions? 

The ATO defines a small business entity as one that: 

  • Has an aggregated annual turnover of less than $10 million (for most concessions) 
  • For certain concessions, has an aggregated annual turnover of less than $50 million 
  • Is carrying on a business for all or part of the income year 

If you meet these conditions, here are some key small business tax benefits your business might be eligible for. 

Lower company tax rate for small businesses 

For the 2024-2025 income year, the standard corporate tax rate is 30%.  

However, from the 2022 financial year onwards, companies operating a business with an aggregated annual turnover of less than $50 million are considered ‘base rate entities’ and can access the lower 25% company tax rate. 

To qualify as a base rate entity eligible for this reduced small business tax rate, your company must: 

  • Have a turnover of less than $50 million for the 2023-24 income year 
  • Have 80% or less of assessable income classified as base rate entity passive income (such as interest, dividends, rent, royalties and net capital gain) 

This 5% small business tax reduction can result in significant savings for eligible businesses. 

Small business income tax offset 2025 

The small business tax offset can reduce the tax you pay by up to $1,000 each year. It applies to taxpayers who either: 

  • are a small business sole trader 
  • have a share of net small business income from a partnership or trust, and the aggregated turnover is less than $5 million. 

You can find more details, plus an example of how the small business income tax offset works, in our article, ‘How do you calculate tax as a sole trader?‘ (noting that the offset is not limited to sole traders). 

Small business depreciation and write-off rules 

Small businesses with an aggregated turnover under $10 million can benefit from simplified depreciation rules, including: 

  • Instant asset write-off: Immediately deduct the full cost of eligible assets costing less than $20,000 that are first used or installed and ready for use between 1 July 2024 and 30 June 2025.  
  • Simplified depreciation pool: Assets valued at $20,000 or more can be added to the small business simplified depreciation pool, where they’re depreciated at 15% in the first year and 30% in subsequent years.  
  • Pool write-off: If your depreciation pool balance falls below $20,000 at the end of the 2024–25 income year, you can write off the entire remaining balance.  

Before changing your depreciation approach, it’s essential to understand the specific rules and timing requirements for opting in and out of the simplified depreciation system. The ATO has strict guidelines about when and how these changes can be made, and getting it wrong could affect your deduction claims. We recommend consulting with your accountant before making any changes to ensure you follow the correct procedures and maximise your available deductions. 

Deductions for professional expenses for startup small businesses

If you’re starting an eligible new small business (such as a company, trust or partnership), you may be able to immediately deduct professional expenses related to starting your new business. These include: 

  • Professional, legal and accounting advice 
  • Government fees and charges. 

This concession applies to expenses incurred from 1 July 2015 onwards for small businesses that meet the eligibility criteria. The immediate deduction is limited to expenses directly related to your business activities and only in the same income year you incurred those expenses.  

Businesses that don’t meet the small business criteria may be able to claim these expenses over a five-year period. 

Small business restructure rollover 

Small businesses with an aggregated turnover under $10 million can change their legal structure without incurring income tax liability when transferring active assets between entities. This allows you to select the most appropriate legal structure as your business evolves. 

Key points about the small business restructure rollover: 

  • Available since 1 July 2016 
  • The transfer must not result in a change to ultimate economic ownership 
  • Applies to active assets that are capital gains tax (CGT) assets, trading stock, revenue assets or depreciating assets transferred to the new entity 
  • May still have stamp duty or GST implications despite the income tax rollover.  

Simplified trading stock rules for small businesses 

Small businesses with aggregated turnover between $10 million and $50 million can use simplified trading stock rules.  

This concession allows you to estimate the value of your trading stock at the end of the financial year and determine whether a formal stock take is necessary or if you can account for changes in your trading stock value based on estimates. 

You can use this simplified approach if the difference between the following is $5,000 or less: 

  • The value of your stock at the start of the income year and 
  • A reasonable estimate of the value of your stock at the end of the year. 

To apply the simplified trading stock rules, your estimate must be ‘reasonable’. The ATO considers an estimate reasonable if: 

  • You maintain a consistent level of stock each year and have a reasonable understanding of the value of your stock on hand or 
  • Your stock levels fluctuate, but you can make an estimate based on your records of the stock you have purchased. 

If you choose not to use an estimate, you must conduct a stock take and account for the changes in the value of your stock according to the general trading stock rules. 

Simpler BAS and accounting on a cash basis 

Businesses with a GST turnover under $10 million can use: 

  • Simpler BAS reporting: No requirement to complete the GST calculation worksheet, and you can leave these sections blank on the BAS. Report only G1 total sales, 1A GST on sales and 1B GST on purchases.  
  • Cash accounting for GST: Account for GST when you receive or make payments rather than when you issue or receive invoices.  

These simplified reporting methods can significantly reduce your bookkeeping and compliance workload. 

Immediate deductions for prepaid expenses 

Small businesses with an aggregated annual turnover under $50 million can claim an immediate deduction for prepaid expenses when the payment: 

  • Covers a period of 12 months or less, and 
  • Ends in the next income year.  

This allows for better management of year-end tax planning by bringing forward deductions where appropriate. 

If the prepayment doesn’t meet the 12-month rule, you can’t claim the deduction immediately. Instead, you’ll need to apportion the deduction over the relevant period to which the expense relates. 

PAYG instalments concession for small businesses 

Eligible small businesses can pay their pay-as-you-go (PAYG) instalments using amounts calculated by the ATO based on: 

  • information from your most recent tax return 
  • adjustments for likely growth in business and investment income.  

This saves you from complex calculations and helps with cash flow management. 

Need help maximising your small business tax concessions?  

With so many concessions available, it’s important to ensure you’re not missing out on opportunities to reduce your tax liability. Our experienced team can provide personalised advice on which concessions will benefit your business the most and help you implement strategies to maximise these benefits. 

For more information on small business concessions or to make an appointment with one of our tax and business service specialists, please contact us by: 

This article was written by Tax and Business Services Director Kylie McEwan and updated by Senior Accountant Rebecca Armstrong. 

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Disclaimer: The information provided in this article is factual in nature and objectively ascertainable and, therefore, does not constitute financial product advice. Importantly, the factual information that has been supplied does not take into account your personal circumstances, objectives or goals.