Maximizing Small Business Savings: How to Qualify for the 90 Test Concessions

Maximizing Small Business Savings: How to Qualify for the 90 Test Concessions

The success of a small business is not only concerning quality products or services offered but also generating savings. Small businesses go a long way to maximize savings to reinvest in the business and to ensure financial stability. To this end, taking advantage of tax concessions is a strategic move to reduce business expenses. One of such concession is the 90 test concession or the small business income tax offset that can greatly help small businesses save money.

What is the 90 Test Concession?

The 90 test concession, also known as the small business income tax offset, is a tax concession used by small businesses to reduce the amount of tax they pay. The offset is available to businesses classified as small business entities with turnover less than $5 million per year. The 90 test refers to the maximum amount of tax offset a business entity can qualify for, which is capped at $1000 each year.

How does it work?

To qualify for the 90 test concessional offset, small businesses must pass two conditions, namely the income test and the aggregated turnover test.

The income test is a requirement for small businesses to have assessable income equal to or below the relevant threshold, which depends on the year and type of business. For example, in the 2021-22 financial year, the threshold for non-primary production businesses is $50,000, while for primary production businesses, it is $100,000.

The aggregated turnover test, on the other hand, considers the total annual turnover of related businesses. A business is eligible for the small business offset if its annual aggregated turnover is below $5 million.

Benefits of the 90 Test Concession to Small Businesses

The 90 test concession offers several benefits to small businesses, including reducing the overall tax liability, increasing the cash flow, and investing the saved money into the business.

Firstly, small businesses can reduce the amount of tax paid by claiming up to $1000 as the concessional offset. The money saved can go a long way to finance other business needs such as hiring new staff or purchasing inventory.

Secondly, the offset can reduce the business’s overall tax liability and improve cash flow, enabling the business to meet financial obligations, including paying suppliers and employees.

Thirdly, the money saved from the 90 test concession can be reinvested in the business, leading to business growth and development.

Examples of Businesses that can Benefit from the 90 Test Concession

There are various small businesses that can benefit from the 90 test concession, such as:

– Service businesses with annual turnover of less than $5 million, such as consultancy firms.
– Hospitality businesses with annual revenue of less than $5 million, such as cafes and restaurants.
– Retail businesses with turnover less than $5 million, such as grocery stores and boutiques.

Conclusion

In conclusion, small businesses can benefit significantly from tax concessions like the 90 test concession. By passing the income test and the aggregated turnover test, small business owners can reduce taxes, improve cash flow and ultimately invest the saved money back into the business. Consequently, it is essential for small business owners to review their tax status regularly to take full advantage of such opportunities.

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