What is the small business income tax offset in Australia 2026?
Yes, the small business income tax offset is available for the 2025-26 income year and beyond. It provides an offset of up to $1,000 for eligible unincorporated small businesses with an aggregated turnover under $5 million, calculated at a rate of 16% of the tax payable on their business income.
Was this helpful?
12 readers found this helpful
12 readers found this helpful
How it works in practice
Understanding the Small Business Income Tax Offset
The small business income tax offset, also known as the small business tax discount, is a tax concession provided by the Australian Government to eligible unincorporated small businesses. It was introduced to support sole traders, partnerships, and trusts by reducing the income tax they pay on their business income.
For the 2025-26 income year and onwards, the offset is calculated at a rate of 16% of the tax payable on the business income component of an eligible individual's total income. The maximum amount of the offset that can be claimed is $1,000 per income year.
To be eligible for the offset, the unincorporated business must qualify as a small business entity for income tax purposes, meaning it must have an aggregated turnover of less than $5 million. The offset is automatically calculated by the Australian Taxation Office (ATO) when you lodge your tax return, provided you declare your business income correctly.
Important exceptions
The small business income tax offset has specific eligibility requirements and limitations:
-
Business Structure: It is only available to individuals who are partners in a partnership, beneficiaries of a trust, or sole traders. Companies are not eligible for this specific offset.
-
Turnover Threshold: The business must have an aggregated turnover of less than $5 million in the income year to qualify as a small business entity for the offset.
-
Maximum Amount: The offset is capped at a maximum of $1,000 per individual per income year, regardless of the amount of business income or tax payable.
-
Business Income Only: The offset is calculated only on the tax payable on the portion of your income that is derived from carrying on a business. Other income sources are excluded.
What you should do now
-
Determine Eligibility: Confirm your business operates as a sole trader, partnership, or trust and has an aggregated turnover under $5 million for the income year.
-
Accurately Record Income: Ensure all business income and expenses are meticulously recorded to correctly determine your taxable business income.
-
Lodge Your Tax Return: File your individual income tax return (or partnership/trust return, which flows through to individual members).
-
Review Assessment: Check your notice of assessment from the ATO to ensure the small business income tax offset has been correctly applied.
-
Seek Professional Advice: Consult a registered tax agent or the ATO if you have any questions about your eligibility or calculation of the offset.
Expert Notes
No expert notes have been added to this question yet.
People also asked
Explore highly relevant questions and get instant verified short answers.