Calculating the Entrepreneurs Tax Offset?

For SBE's with a turnover of $50,000 or less, the Entrepreneurs Tax Offset will be 25% of the total tax payable on the net income.

For example:

ACME Pty Ltd has a turnover of $50,000.

ACME Pty Ltd has a net profit is $40,000.

The tax payable for a company on net profit of $40,000 (at 30%) is $12,000. 25% of $12,000 is $3,000 so the Entrepreneurs Tax Offset will be $3,000 for ACME Pty Ltd.

Their total tax payable will be $12,000 - $3,000 = $9,000.

For SBE's with a turnover between $50,000 and $75,000, the Entrepreneurs Tax Offset is reduced by the small business phase-out function. This is calculated as follows:

($75,000 - SBE aggregated turnover)

25,000

The small business percentage is calculated as follows:

Net SBE income x 100

Taxable income

To calculate the Entrepreneurs Tax Offset for entities with turnover between $50,000 and $75,000, the formula is:

25% of tax liability x small business percentage x small business phase-out fraction

For more information, visit http://www.ato.gov.au/businesses/content.asp?doc=/content/67700.htm.