The 25% Entrepreneurs’ tax offset is a little known tax concession for Australian small business which means that you can reduce your tax payable by up to 25% if your business has a turnover of less than $75,000.
This law has applied since 1 July 2005 when Treasurer made a press release (#019/2005) stating that the Entrepreneurs’ Tax Discount will provide a tax cut on the income tax paid by small and home-based businesses who have chosen to operate using the Simplified Tax System (STS):
- It doesn’t matter what corporate structure you’ve chosen for the business (Pty Ltd Company, Sole Trader etc)
- If annual turnover is $50,000 or less then you will be eligible for a 25% discount on your income tax liability
- The 25% discount will phase out at one percentage point for each $1000 of turnover above $50 000, ceasing once annual turnover exceeds $75 000. For example small businesses with turnover of $60,000 can get a 15% tax offset
Note that if you earn money as an employee of another company than you have to pay the full normal rate of tax on that income. The 25% discount only applies to your small business income.
To see how much tax you can save there here’s an example: If your company has a turnover of $50,000, the maximum tax it would pay would be $15,000 (30% x $50,000) (although this would usually be reduced by deductible expenses made in the course of earning the business income). Tax Saved = $3,750 
Ask your accountant for more details and to see if you qualify for the 25% Entrepreneurs Tax Offset.
{ 6 comments… read them below or add one }
I wish we had some tax break like this in the USA…
I was pleasantly surprised by the entrepreneurs tax discount when I was doing my tax this last year. I botched up (in typical fashion) my calcuations on my return, which thankfully the ATO corrected in my favour, and was quite impressed with the value of the discount.
really informative…are you sure something like this doesn’t exist in America? I would like to utilize something like this if anyone knows.
Damn I wish they had something like this in Canada. This would help a lot of small businesses get that little extra cash they need
EDITOR: well your current Prime Minister Stephen Harper is a conservative so he probably would be open to doing something similar
Yeah, he is a conservative, but they got a small minority government, so most of their economic policies don’t get through. As well, there’s still provincial taxes.
It’s quite amazing how many tax incentives there are for businesses. In Canada (Ontario) we have called SR & ED (Scientific Research & Experimental Development). For example, if you’re developing software and it’s somehow unique (does not exist on the shelf) then you can likely qualify to have a 40-60% of the development costs returned as a tax credit!
Unfortunately many businesses don’t know these tax programs exist and never take advantage of them!