Small Business Tax Law

Introduction

Globalization is a very topical occurrence for most small business (Graham 2005). Jaye Radisich, CEO of the Council of Small Business of Australia claimed that small business is the spine of the Australian economy ( COSBOA 2009). Nonetheless, many small business faced challenge of how to globalize their maneuver in order to take advantage of immediacy in global markets to compete with larger companies ( Graham 2005).

Small business

Small business refers to 'small business entity', which is an individual, partnership, trust or company that carries on the business ( Australian Tax Office 2009) .

According to Barkoczy (2009) , 'small business entity" carries on business during the year and it satisfies $2m "aggregated turnover test" which is the test to determine aggregation. This test is satisfied if:-

* Its aggregated turnover for the previous year was less than $2m

* Its aggregated turnover for the current year is likely to be less than $2m

* Its aggregated turnover for the current year is actually less than $2m ( s328-110) .

In addition, an "affiliate" of an entity is an individual or company which acts, or could reasonably be expected to act, in accordance with the entity's directions, or in concert with the entity ( s328-130)

Small business concessions and its purpose

According to Australian Tax Office (2009), since 1 July 2007, small business entities have been eligible, subject to conditions, for a range of tax concessions. Legislation has been enacted to smoothen the process of small business accessing a number of concessions, namely capital gains tax (CGT), goods and services tax (GST), pay as you go instalments (PAYGI), fringe benefits tax (FBT) ( s328-10). The concessions provide a charily coordinated use of concessions overall (Australian Tax Office 2009).They were well planned. Some of the concessions were introduced ad hoc and some are not( Morrison 2003). There are some suggested changes proposed for small business entities that it was suggested by the government that they introduce some family income tests and restrictions on the entrepreneur's offset where the family income exceeds $75,000 and $120,000 for a family ( Barkoczy 2009).

Tretola (2007) stated the purpose of small business concession includes the aim to promote business activity, providing simpler processes in terms of capital allowances and trading stock, reducing tax and compliance costs.

The entrepreneur's tax offset

The entrepreneurs' tax offset (ETO) is a tax offset equal to 25% of the income tax payable on business income (Subdiv 61