From 2015-2016, ATO has introduced one more tax offset:

Small business income tax offset which can reduce the tax up to $1,000 for an individual.

ATO will work out this offset based on the amounts shown in income tax return. These would be applicable on:

  • net small business income that an Individual earned as a sole trader
  • Share of net small business income from a partnership or trust.

To be eligible for the offset as a sole trader, you must be a small business entity. If you have a share of net small business income from a partnership or a trust, that partnership or trust must be a small business entity.

Below is the link of this tax offset calculator which can be used for the ease.

https://www.ato.gov.au/calculators-and-tools/Host/?anchor=SBITO&anchor=SBITO/questions#SBITO/questions

Disclosure part in tax return:

The trust needs to disclose at label V – Net Small Business income

Also at item 54 Label Y will need to be completed for each beneficiary.

Tax returns of beneficiary would also need to show a share of the small business net income of the trust.

Sole traders

Net small business income

Your net small business income is used to calculate your small business income tax offset. It is the sum of your assessable income from carrying on your business, less any deductions you can apply to that income.

If your net small business income is a loss, it is treated as zero. This means you won’t be entitled to the offset.

How your net small business income is calculated

Your net income is all of your assessable income from sole trading activities minus deductions, as opposed to gross income. If you had more than one sole trader business during the income year, you combine all of your assessable business income from all your sole trader businesses, minus the deductions from that income.

If you carried on more than one business and any of your businesses made a loss, you need to apply the non-commercial losses rules first. Your net small business income is only reduced by losses deductible in the current year.

To work out your net small business income, start with the net business income or loss. Increase this amount by any sole trader deferred non-commercial losses not deductible in the current year.

Eligible income and deductions

Include the following amounts in your net small business income:

  • any farm management deposits claimed as a deduction
  • any repayments of farm management deposits included as income
  • any net foreign business income that relates to your sole trading business
  • Other income or deductions such as interest or dividends derived in the course of conducting your business.

Income and deductions you cannot include

Do not include the following income amounts in working out net small business income:

  • net capital gains you made from carrying on your business
  • personal services income (unless you were a personal services business)
  • salary and wages
  • allowances and director’s fees
  • government allowances and pensions
  • Interest and dividends unless it’s related to a business activity.

Do not include the following deductions in working out net small business income

  • tax-related expenses such as accounting fees
  • gifts, donations or contributions
  • personal superannuation contributions
  • current year business losses which are not deductible this year under the non-commercial loss rules
  • Tax losses from prior years (unless they are deferred non-commercial losses).