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A Guide to Managing Tax Offsets for Your Business

Managing taxes can be incredibly challenging for business owners. After all, there are so many rules that you need to adhere to just so that you can ensure you don’t have any remaining debts with the government. It can be stressful and time-consuming to handle your finances, especially with everything you have to deal with relating to your business.

That’s why it would be best to rely on a small business accountant to take care of your tax dues. With the changes the Australian Taxation Office (ATO) undergoes every year, you’re more likely to come across errors regarding your tax compliance unless you have the right professional to assist you.

Since your small business continues to contribute to the economy, you can be entitled to a tax offset amounting to up to one thousand dollars, given that you take the proper measurements to file your taxes correctly. Keep reading below to find out more about tax offsets.

What is a Tax Offset?

A tax offset is a financial plan led by the government to provide additional benefits for entrepreneurs and businesses. Since 96% of the current companies in Australia are categorised as small and medium-sized enterprises, the government acknowledges its positive influence on the country’s economy.

Now more than ever can small businesses rely on tax offsets because of the recent COVID-19 pandemic. It serves as a way for you to recover from experiencing sudden losses with your business, allowing you to at least rebound to prepare for the year ahead.

To compute for a tax offset, it will depend on the rate of the income of your small business and the amount of tax you need to pay. Business owners with a total turnover of below five million dollars per fiscal year can apply for a tax offset, given that its maximum reduction rate is set to one thousand dollars.

How to Compute for a Tax Offset

The ATO computes the possible amount that can be cancelled out from your small business’ taxes by basing it on your net income and type of business. It includes being a sole trader or running your business through a partnership or trust.

Running a Small Business as a Sole Trader

Your income tax offset as a sole trader is computed through the total of all your company’s assessable income, excluding the deductions. The analysis of your tax offset report should include your net foreign business income and your farm management deposits which are filed as a deduction. Your farm management deposits’ repayments, which are reported as a portion of your business’ income and various kinds of income or reductions relating to your company, are also included.

It’s important to know that if you’re a sole trader with a net small business income that’s currently operating at a loss, you are not eligible to receive a tax offset. If you’re unsure of your situation, you can rely on a tax accountant to oversee your company’s financial reports.

Running a Small Business as a Partnership or Trust

If you have a small business established as a partnership or trust, your tax offset is computed based on how you divide your net small business income. You can apply for an offset claim when a portion of your net business income is considered a small business entity.

Besides that, you can also apply for a tax offset if you are the standing beneficiary of the partnership or trust agreement, or your assessable income involves a portion of its net income. You can also get one by claiming your income from the business partnership or trust that holds its own activities.


Getting a tax offset can significantly benefit your business, primarily if you’re experiencing rough times due to the changes in the economy. For best results, seeking the help of an accounting firm is necessary because you can trust them with your finances, and they can be sure to provide sound advice concerning your decisions.

Are you looking for the best accountants in the Gold Coast to help with your small business’ taxes? New Wave Accounting offers end-to-end accounting and bookkeeping services to small businesses looking to expand. We provide tailored solutions to meet your accounting needs. Get in touch with us today to book a call!

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