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How it is calculated
The offset is 16% of the income tax attributable to your total net small business income, in other words your business profit's share of your overall tax bill.
| Sole trader profit | Approximate tax on it | SBITO at 16% |
|---|---|---|
| $30,000 | About $2,142 | About $343 |
| $50,000 | About $6,538 | About $1,000, the cap is reached |
| $80,000 and above | $15,000 or more | $1,000 flat, the cap binds from roughly here |
Mixed income apportions: where you have wages plus business income, the offset applies only to the business slice of the tax. It shows up as a line on your notice of assessment, which is the checking habit worth having, especially where business income was mislabelled in the return. Contractor income entered at the wrong label is the classic way the offset silently fails to apply.
Who is in, who is out
In: sole traders under $5 million aggregated turnover, and individuals receiving a share of net small business income from a partnership or trust that is itself a small business entity.
Out: companies, since this is the unincorporated sector's consolation for missing the 25% rate; PSI attributed to you, because attributed personal services income is not business income for the offset, which is another quiet cost of failing the PSI tests; and passive investment income dressed as business.
In the structure maths: SBITO is worth up to $1,000 a year of staying unincorporated. Small, but it stacks with the sole trader's other exclusive perks (the full CGT discount, losses against other income, minimal compliance cost) in the incorporation break-even. And like every offset, it only exists in lodged returns: sole traders with years outstanding have unclaimed SBITO sitting in each of them, alongside the rest of the refund.
Frequently asked questions
What is the small business income tax offset?
Do I need to claim it?
Do companies get the offset?
Why didn't I receive it?
Is it worth staying a sole trader for?
General information only - not personal tax, financial or legal advice. Consider your own circumstances or speak to a registered tax agent. Remission of penalties or interest and payment plans are decisions of the ATO and outcomes can't be guaranteed.