Publication Details

McLaren, J. (2006). The tax offset for entrepreneurs: a critical review of the 25% tax offset concession for small business. Journal of the Australasian Tax Teachers Association, 2 (1), 107-120.


From 1 July 2005, small business taxpayers using the Simplified Tax System and with a turnover of $50,000 or less are allowed a tax offset of 25 per cent on their tax payable. If turnover exceeds $50,000, the tax offset phases out at 1 per cent until the turnover reaches $75,000. This tax concession was part of the government's election statement made on 26 September 2004 in which the government stated that it wanted to assist and encourage small business entrepreneurs, particularly those set up from home. The steps involved in calculating the amount of tax offset that can be claimed are complicated where the business is structured as a trust or partnership and also where the taxpayer earns other income not just from the business. The offset also requires the small business taxpayer to be in a position to actually pay income tax before the tax offset provides any advantage, so that non-taxpaying small businesses receive no assistance. This paper critically reviews the 25 per cent tax offset and suggests alternative ways in which entrepreneurs could have been assisted by the tax system, for example, a reduced rate of income tax.

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