The small business income tax offset (also known as the unincorporated small business tax discount) can reduce the tax a business pays by up to $1,000 each year.
The offset is worked out on the proportion of tax payable on business income.
To be eligible, a taxpayer must be carrying on a small business as a sole trader, or have a share of net small business income from a partnership or trust, and have an aggregated turnover of less than $5 million.
The rate of the offset is 8% up to the end of the 2019-20 income year, but will increase to 13% for 2020-21 and again increase to 16% for 2021-22 and then remain at that level.
The ATO calculates the offset using information from the business’s tax return, with the offset amount shown on the notice of assessment.
The ATO’s Small business income tax offset calculator works out the income amounts to be used to work out the tax offset, and will inform the taxpayer where to include this information in their tax return. It doesn’t work out the tax offset; this is done by the ATO when it processes the tax return. A taxpayer can also access the calculator from within myTax.