Simplified Tax System (STS)


This is an option available to small business taxpayers and which simplifies some aspects of their income tax affairs. Some, note, not all. In fact, it simplifies only a few aspects of tax but, like beggars, taxpayers can’t be choosers.

STS applies only to businesses; it does not apply to those deriving income from wages and salaries.

The benefits are:

Assets costing less than $1000 can be written off as an immediate deduction. Non-STS taxpayers, on the other hand, have to depreciate everything that cost more than $100, although you can allocate assets with a cost or written-down-value of less than $1000 to a Low Value Pool. Also, STS taxpayers do not have to work their way through the many, many pages of depreciation rates to find out the applicable rate for a guitar; all assets except for long lived assets (buildings etc) go into a General Pool where everything is depreciated at 15% diminishing value in the first year (regardless of the purchase date) and 30% thereafter.

You are able to get a tax deduction for expenses paid up to twelve months into the future; on the 30 June you could get a tax deduction for the rent for that month, and for the rent from July to June in the next financial year. Non-STS taxpayers cannot get a deduction for payments made in a current financial year that for services that will be supplied in the following financial year.

If you are carrying on a trading activity you do not need to conduct a stocktake if the change in value is $5000 or less.

STS taxpayers may be eligible for the entrepreneurs’ tax offset, a rebate off the tax liability. The rebate is 25% where STS turnover is less than $50000, dropping to zero when STS turnover reaches $75000.