Concessions To Reduce Your Tax Bill In Australia: Complete Guide

Wednesday, 27 Jan 2021

Small business owners are always on the lookout for ways of reducing their expenses. However, they often end up paying much more than what is required because of lack of knowledge of the tax laws.

The tax bills form a significant part of the costs borne by an entity, which can snowball into a huge sum if the return is filed without understanding the  complete procedure. Professional bookkeepers in Melbourne can help you reduce the tax bill while still fulfilling all the state’s tax obligations.

A vast number of small businesses can take advantage of the concessions whether they own a company, partnership, trust, or a sole trading entity. The eligibility for concessions has to be assessed every year by the business owner.

To use these concessions, your business must trade throughout the financial year or for a part of it. Plus, its turnover must be less than $10 million which is applicable to most concessions except small business income tax offset and CGT concessions. Let us take a look at how the tax bill can be reduced for your business.

Small Business Income Tax Offset

Although the small entities can claim a variety of tax deductions for the cost incurred in running the business, the bookkeeper will apprise you about the concessions that can further reduce the tax bill.

The income tax offset is among those concessions and is known as the unincorporated small business tax discount. It is highly recommended by bookkeeping companies in Sydney because it can reduce the tax payment by almost $1000 for the year.

To be eligible for this concession, the aggregated turnover of the small business must be less than $5 million for the financial year. The offset is calculated by the ATO from the data collected from your tax return.

The amount is intimated to the business owner via the notice of assessment. Your bookkeeper can assist in the calculation or you can simply go to the ATO website and use the calculator for the same. The amount will get added to the tax refund if you use my Tax for filing the return.

Lower Company Tax Rate

The company tax rate has undergone some changes and the lower tax rate is now 27.5% while the full tax rate is 30%. The company tax rate is applicable to small businesses which are operating as companies and trusts (corporate unit and public trading).

The lower company tax rate is applicable to those entities which are operating as base rate entities from 2017-18 to 2021-22 financial years or small businesses from 2015-16 to 2016-17 financial years.

It means that the companies which are base rate entities between 2017-18 to 2021-22should apply for lower company tax rate. For the financial year 2020-21, the rate will further decline to 26%, and in 2021-22, it will come down to 25%.

A company becomes a base rate entity if its aggregated turnover is lower than the aggregated turnover threshold and 80% or less of its assessable income can be termed as base rate entity passive income. A good bookkeeper can assist you in understanding the nitty-gritty of these concessions and saving valuable capital of the business.

Instant Asset Write Off

Small businesses in Melbourne which are eligible for instant asset write-off can deduct the business part of the cost of an asset for the year in which it was used for the first time or was installed ready for use.

The deduction can be claimed for multiple assets if the price of every asset is below the appropriate threshold. It is applicable to both new and second-hand assets. The bookkeeper will help you to utilise the simplified depreciation rules to make a claim for the instant asset write-off.

As per the latest guidelines offered by the ATO, the threshold amount has changed. The new rules state that the threshold amount for every asset is $150,000 which were first used or were ready for use from March 12, 2020 to June 30, 2021. The assets must be purchased before December 31, 2020 by the business which has an aggregated turnover below $500 million.

Accelerated Depreciation

It can be claimed by small businesses in Sydney for the cost of its assets, but it excludes some vehicles, so you must check with the bookkeeper about the eligibility. The claim can be made for assets which are new and were not earlier owned by some other businesses.

The asset should be first held by the business on or after March 12, 2020.  It must have been first used or installed ready for use between March 12, 2020 and June 30, 2021. However, you must remember one vital thing that if you have claimed the instant asset write-off, then you cannot claim this concession. Your bookkeeper in Sydney usually keeps track of this information and does not allow you to falter with your tax returns.

Immediate Deductions For Prepaid Expenses

Small businesses in Melbourne can take advantage of an immediate deduction for prepaid expenses if the payment has been made to last 12 months or less and will end in the coming financial year. Entities whose turnover is below 50 million can start deducting their prepaid expenses from July 2020.

Simplified Trading Stock Rules

It helps the eligible businesses to use the simplified rulings at the end of the income year stock take. It can be leveraged if there is a difference of $5000 or less between the value of the stock on hand at the beginning of the financial year and the fair valuation of the stock on hand at the end of the year.

The rulings allow the business to do away with stocktaking at the end of the financial year. In addition, the business owner does not have to account for any alterations in the valuation of the trading stock. Your bookkeeper can simply report the same amount for the opening as well as the closing stock in the tax return.

Deductions for Professional Expenses For Start-Ups 

Small-sized start-ups can deduct expenses such as legal and accounting fee paid to professionals and other government charges. Entities whose turnover is below $50 million can use these concessions from July 2020. Your bookkeeper can help you to understand other such deductions which can aid in reducing the final tax amount.


It may seem like a harrowing job to understand all the taxation obligations and the deductions rules. Thus, you must rely on the services of a professional bookkeeper in Melbourne to get the job done. They keep track of the transactions and help to save money during the tax season with their expertise and prudence.

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