Commercial properties and ETO

[Mry]

For those people running commercial rental properties and

* Earning less than $75,000 in gross rents from those commercial properties, and
* Having no other linked business income (called 'STS group turnover') -

there is an opportunity in the next year to avail yourself of the Entrepreneur's tax discount which could avail you a 25% discount on your tax that relates to your commercial rental property. But there are some nice planning opportunities as well.

For example, lets say that we have a commercial rental property earning $40,000 in gross rents, $30,000 in expenses and you are also in receipt of salaried income of $140,000. This leaves you with paying tax on the full $140,000 and getting a 25% discount on the $10,000.

We can do better than that.

Lets say your employer allows you to salary sacrifice all of your commercial rental property expenses. You now pay full tax on the $110,000 and get a discount of 25% on the tax of the extra $40,000. You still earn $150,000 all up, but more of the tax is discounted.

Those who have commercial rental properties earning less than the $75,000 with no other linked STS group turnover income should be looking at salary sacrificing where possible.

This doesn't apply to the renting out of residentials however.

 

[Hellman]

TAX DISCOUNT FOR SMALL BUSINESS

The 25% Entrepreneurs’ Tax Discount will provide welcome tax relief for about 540,000 small and home- based businesses at a cost of $1.2 billion. Small businesses that are in the Simplified Tax System and have an annual turnover of $50,000 or less will be eligible for a 25 percent discount on their income tax liability in respect of their business income.

A small business operator in the Simplified Tax System with an annual turnover of $40,000 and net income of $35,000 would receive a tax offset of $1,668. The 25 per cent discount will phase out at one percentage point for each thousand dollars of turnover above $50,000 so that the discount ceases once an eligible business’s annual turnover exceeds $75,000. It will apply from 1 July 2005.