The Government has announced that the Entrepreneurs Tax Offset is to be abolished from the 2012-13 financial year.
The Entrepreneurs Tax Offset (ETO) is a tax offset equal to 25% of the income tax payable on your ‘net small business income’ for the year.
It applies to small businesses with an aggregated turnover of less than $75,000 and begins to phase out for turnovers greater than $50,000.
Am I Eligible for the for the Entrepreneurs Tax Offset?
For the 2011-12 financial year, you will need to meet an income test if you are an individual receiving small business income that is eligible for the ETO as a sole trader, partner in a small business partnership or beneficiary of a small business trust. The income test can further reduce your tax offset.
You meet the income test if your income for ETO purposes does not exceed:
- $70,000 (the single threshold) if you are single with no qualifying dependant, or
- $120,000 (the family threshold) if you had a qualifying dependant on any day during the income year, or spouse on the last day of the income year.
How is the Entrepreneurs Tax Offset Calculated?
At the most basic level, the ETO is calculated as:
|25% of the tax on taxable income||x||Net Small business income
Taxpayers taxable income
However, as the offset phases out between $50,000 and $75,000 turnover, the calculation is often a five or six step process and depends on a few factors.