A Guide to Small Business Offsets

Small businesses make up a significant portion of Australia’s workforce. They contribute billions of dollars to the country’s overall Gross Domestic Product (GDP) and are responsible for employing a large number of Australians.

A small business can be defined in a number of different ways, depending on which government agency you are referring to. The Australian Bureau of Statistics (ABS) defines a small business as one that employs fewer than 20 people. This includes sole trader operations.

The Australian Taxation Office (ATO), on the other hand, states that a small business is one that operates with a turnover of less than $10 million. The ATO previously defined a small business as one that has a turnover of less than $2 million; this 2016 change resulted in a large increase in the number of companies that fell under the classification of a small business. As per the ATO’s definition, 98.4 percent of Australian companies operating in the last financial year were small businesses. If you are unsure how to define your business, it is best to contact a team of tax accountants.

Small business grants and offsets
Federal and state governments in Australia understand how important small businesses are to the country, from a financial perspective and as a source of employment. The Small Business Tax Offset and other relevant incentives, including the Research and Development Tax Incentive and the Export Market Development Grant, are designed to support small businesses, assisting them access funds and resources that will help establish plans for the future

Small Business Tax Offset
The Small Business Tax Offset is available to all companies that meet the ATO’s definition of a small business. It provides businesses with an offset of up to $1000 per year; the exact figure is calculated based upon the proportion of tax payable on your business income.

Research and Development Tax Incentive
Research and development (R&D) is important for any business that is looking to break into new markets and improve their products and services. However, undertaking R&D is often a costly exercise.

The Australian Government recognises this and provides tax offsets to businesses engaging in core R&D activities. What defines a ‘core R&D’ activity? Well, according to the ATO, a core activity is one in which the ‘outcome cannot be known or determined in advance on the basis of current knowledge, information or experience’ and is ‘conducted for the purpose of generating new knowledge’.

It can be difficult to discern whether you are eligible for the R&D grant, particularly as there are different levels of offset available depending on your annual turnover. If you are interested in engaging in R&D activities, consider reaching out to tax accountants to discuss your situation.

Export Market Development Grant
As a small business owner, you are no doubt looking not simply to survive but to grow and thrive. The Export Market Development Grant is designed to assist small businesses who are looking to expand their operations offshore by providing a fixed grant to cover expenses incurred when undertaking international promotional activities.

Why should I work with an accountant?
Receiving a grant or tax offset is one thing; understanding how to best use it for long-term financial and operational success is another entirely. If you operate a small business and are looking to make the most of the government’s support, it is an excellent idea to reach out to a team of tax accountants.

Professional accountants will be able to provide guidance on making the most of your benefits, reinvesting your savings in a manner that will help your business succeed.