Small Business Tax Offset Calculator

Who Can Receive the Offset

The small business income tax offset reduces individual income tax on eligible business income. You can qualify as a sole trader or through an assessable share of income from a qualifying partnership or trust.

For a partnership or trust share, you must be a partner or beneficiary of the entity that earned the income from its own business. Use the net small business income on its distribution statement or advice.

The business must satisfy the small business entity test. The aggregated turnover threshold is under $5 million from 2016-17 and under $2 million for 2015-16. Include the annual turnover of affiliates and connected entities, and exclude dealings between entities in the group.

The turnover test can use the prior year, an eligible current-year estimate or actual current-year turnover. Enter the figure used for the test you meet. The small business entity and offset provisions set out when each turnover method applies.

A company’s retained profit belongs to the company, so leave it out of your eligible business income. Any lower company tax rate applies to the company’s own taxable profit. Use the company tax calculator for that amount.

Find Net Small Business Income

Start with assessable brokerage income from the business, including eligible upfront and trail commissions. Subtract deductions attributable to that income, such as deductible aggregator fees. Apply the non-commercial loss rules first and leave deferred losses out until they become deductible.

Leave out salary, director’s fees and net capital gains. Personal services income qualifies only when it comes from carrying on a personal services business. Exclude government allowances and pensions. Include interest or dividends only when they arise from carrying on the business. Tax-related expenses, gifts and personal super contributions do not reduce this offset’s income figure.

Combine all your sole trader activities and count the result as zero if they make a net loss. From each qualifying partnership or trust share, subtract the allowable deductions that relate to it. Count each share as zero if those deductions exceed the share, then add up the eligible net amounts.

For multiple sources, include only entities that pass the turnover test. Enter their highest qualifying aggregated turnover for the check above. Total taxable income is a separate figure. It includes income from other sources, such as wages.

Calculate the Attributable Tax

Divide eligible net small business income by total taxable income and multiply by basic individual income tax. If eligible income meets or exceeds taxable income, use all of the basic tax. A business loss or nil taxable income gives a $0 offset. Special rules can apply to taxpayers under 18.

Basic income tax is the amount under the income tax rates that apply to you before offsets. Enter it without Medicare levy, study loan repayments or amounts already withheld.

Apply the selected year’s offset rate to the attributable tax. The rate is 5% for 2015-16, 8% for 2016-17 to 2019-20 and 13% for 2020-21. From 2021-22 it is 16%. The cap is $1,000 per person for the whole year. See the Australian Taxation Office (ATO) guide to rates and eligible income.

Worked Offset and Cap Examples

In the starting 2026-27 example, a sole trader has $87,450 in aggregated turnover and $31,590 in eligible net business income. After other income, total taxable income is $64,800. Their basic tax at full-year resident rates is $9,960.

$31,590 divided by $64,800 gives a business share of 48.75%. That share of $9,960 is $4,856 in attributable tax when shown to the nearest dollar. Applying 16% before rounding gives an estimated offset of $777.

In a separate 2026-27 example, take $52,000 of eligible net business income, $98,000 of taxable income and $19,920 of basic tax. With eligible turnover, 16% of the attributable tax gives $1,691 before the cap. The estimated offset is $1,000.

Read the Result Against the Tax Return

The ATO works out the offset from your individual tax return and lists it on your notice of assessment. The offset is non-refundable. It can reduce income tax to zero, and any unused portion cannot create a cash payment.

Reconcile your eligible net business income against the small business income tax offset fields in myTax. Cross-check each partnership or trust amount against its distribution advice, then check total taxable income and basic tax for the same year.

Lenders assess self-employed income for borrowing under their own policies. Keep lender adjustments such as depreciation addbacks out of the offset calculation.