Small Business Entity Concessions in Australia 2026–27: An Accountant's Guide to Aggregated Turnover and Tax Savings

For Australian small businesses, the tax concessions available through the small business entity (SBE) framework can represent tens of thousands of dollars in annual savings. Yet many business owners either miss concessions they are entitled to, or inadvertently claim concessions for which they do not qualify — both of which carry serious ATO consequences. With the 2026–27 income year bringing significant changes, including a proposed permanent $20,000 instant asset write-off and updated compliance scrutiny, now is the time to work with a qualified accountant to map your eligibility and plan strategically.

What Is a Small Business Entity?

A small business entity is a business that carries on a business and has an aggregated annual turnover of less than $10 million for the relevant income year. Aggregated turnover is not simply your own business revenue — it includes the annual turnovers of any entities that are connected with or affiliated with your business under the tax law definitions.

This distinction matters enormously. Two businesses that appear separate may be treated as connected if one controls the other, or if both are controlled by the same third party. An accountant can assess your specific ownership and control structures to determine whether connected or affiliated entities must be included in your aggregated turnover calculation.

Eligibility must be assessed each income year. A business that qualified as an SBE in 2025–26 is not automatically an SBE in 2026–27 — though a useful transitional rule allows a business to remain an SBE in the current year if its aggregated turnover was under the threshold in the prior year.

The Aggregated Turnover Thresholds That Matter

Not all SBE concessions use the same turnover threshold. Understanding which threshold applies to each concession is essential for accurate planning.

• Under $2 million — Access to the small business CGT concessions (15-year exemption, 50% active asset reduction, retirement exemption, and rollover relief). Alternatively, businesses may qualify under the maximum net asset value test of $6 million or less.
• Under $5 million — Access to the Small Business Income Tax Offset (SBITO), available to sole traders and individual partners in a partnership.
• Under $10 million — Access to the instant asset write-off, simplified depreciation rules, GST concessions (including cash accounting), and PAYG instalment concessions.
• Under $50 million — Eligibility for the base rate entity company tax rate of 25%, rather than the standard 30% corporate rate.

Each threshold requires separate assessment. A business with $8 million in aggregated turnover qualifies for the instant asset write-off but not the SBITO or the small business CGT concessions.

The Permanent $20,000 Instant Asset Write-Off: What You Need to Know

The instant asset write-off allows eligible SBEs to immediately deduct the full cost of qualifying depreciating assets, rather than depreciating them over several years. For 2025–26, the threshold is $20,000 per asset (GST-exclusive for registered businesses), and this is fully settled law under the Treasury Laws Amendment (Strengthening Financial Systems and Other Measures) Act 2025.

The 2026–27 Federal Budget, delivered on 12 May 2026, proposed making the $20,000 threshold permanent from 1 July 2026, ending the annual uncertainty that has plagued business planning for years. However, this proposal is contained in the Treasury Laws Amendment (Tax Reform No. 2) Bill 2026, which had not yet received Royal Assent at the time of writing. Until legislated, the default threshold from 1 July 2026 technically reverts to $1,000.

Accountants are advising clients to base current tax planning on legislation already in force, while monitoring the Bill's progress closely. If the permanent threshold is legislated, it will remove the need for annual extensions and allow businesses to plan asset purchases with confidence.

Key Rules for the Instant Asset Write-Off

• Per-asset basis — The $20,000 limit applies to each individual asset. There is no cap on the number of qualifying assets you can write off in a single year.
• First use or installation — The asset must be first used or installed ready for use in the income year for which the deduction is claimed.
• Business use only — If an asset is used for both business and private purposes, only the business-use proportion is deductible.
• Car cost limit — Vehicles designed to carry fewer than nine passengers are subject to the annual car cost limit ($69,674 for 2025–26). Many commercial utes over one tonne are exempt from this limit.
• Ownership required — The business must own the asset. Chattel mortgages and hire purchase agreements generally allow the write-off; operating leases typically do not.
• No artificial splitting — The ATO prohibits splitting a single high-value asset into multiple invoices to circumvent the threshold.

Small Business Income Tax Offset (SBITO)

The SBITO is available to sole traders and individual partners in a partnership with aggregated turnover under $5 million. The offset is calculated at 16% of the tax payable on net small business income, capped at $1,000 per person per year.

While the cap limits the maximum benefit, the SBITO is a direct reduction in tax payable — not merely a deduction — making it particularly valuable for sole traders in the lower tax brackets. An accountant can help you calculate your net small business income correctly, particularly where you have both business and personal income sources.

Small Business CGT Concessions

The small business CGT concessions are among the most powerful tax planning tools available to Australian business owners, but they are also among the most complex. There are four main concessions, and they can be applied in combination to potentially eliminate CGT entirely on the sale of an active business asset.

• 15-year exemption — If you have continuously owned an active asset for at least 15 years and are aged 55 or over (or permanently incapacitated), the entire capital gain may be exempt. This is the most generous concession available.
• 50% active asset reduction — Reduces the capital gain by 50% for assets that are active assets of the business. This can be combined with the general 50% CGT discount for assets held over 12 months, potentially reducing the taxable gain to just 25% of the original amount.
• Retirement exemption — Allows up to $500,000 of capital gains (lifetime limit) to be exempt if the proceeds are contributed to superannuation (for those under 55) or simply exempted (for those 55 and over).
• Rollover relief — Allows the capital gain to be deferred if the proceeds are reinvested in a replacement active asset within two years.

Eligibility requires either the $2 million aggregated turnover test or the $6 million maximum net asset value test. The active asset test must also be satisfied — the asset must have been an active asset of the business for at least half of the ownership period (or 7.5 years for assets held over 15 years).

Australian Regulatory Context

The ATO has increased its scrutiny of SBE concession claims in recent years, particularly around the calculation of aggregated turnover and the application of the small business CGT concessions. Common areas of ATO focus include:

• Incorrect exclusion of connected or affiliated entities from aggregated turnover calculations
• Claiming the instant asset write-off for assets that were not first used or installed ready for use in the relevant income year
• Applying the small business CGT concessions to assets that do not satisfy the active asset test
• Artificial arrangements designed to reduce aggregated turnover below a threshold

The ATO's data-matching capabilities have expanded significantly, and discrepancies between reported turnover and third-party data (including bank feeds, payment platforms, and industry benchmarks) are increasingly flagged for review. Maintaining accurate, contemporaneous records is not optional — it is essential.

The Tax Practitioners Board (TPB) regulates the tax agents who advise on these concessions. Engaging a TPB-registered tax agent or CPA/CA-qualified accountant ensures your adviser is bound by professional standards and carries professional indemnity insurance.

Questions to Ask Your Accountant

Before your next tax planning meeting, prepare these questions to ensure you are maximising your SBE concession entitlements:

• What is my aggregated turnover for 2026–27, including all connected and affiliated entities?
• Which SBE concessions am I eligible for this year, and which thresholds apply to each?
• Should I purchase planned assets before or after 30 June to optimise the instant asset write-off?
• Do any of my business assets qualify for the small business CGT concessions if I sell?
• Am I eligible for the SBITO, and how is my net small business income calculated?
• What records do I need to maintain to support my SBE concession claims in the event of an ATO review?
• How does the proposed permanent $20,000 instant asset write-off affect my asset purchase planning?

How MyMoney® Can Help

Navigating the small business entity concession framework requires more than a basic understanding of the rules — it requires an accountant who understands your specific business structure, ownership arrangements, and long-term goals. The difference between a well-planned SBE strategy and an incorrect claim can be tens of thousands of dollars, plus penalties and interest.

MyMoney® connects Australian business owners with qualified, experienced accountants who specialise in SBE tax planning, CGT concessions, and ATO compliance. Whether you are planning an asset purchase, considering a business sale, or simply want to ensure you are claiming every concession you are entitled to, the right accountant makes all the difference.

Post a Brief on MyMoney® to receive tailored proposals from accountants who understand the 2026–27 SBE concession landscape. Or Browse Accountants on MyMoney® to compare qualifications, specialisations, and client reviews before making your choice.