What is the small business tax offset?

Understand what the small business tax offset is and who may be entitled to claim it.

Summary

The small business income tax offset can reduce the income tax payable by eligible individuals with net small business income. For 2021–22 and later income years, the offset rate is 16%, capped at $1,000 per individual.

What this means

To be eligible, you generally need to carry on a small business as a sole trader or receive a share of net small business income from a partnership or trust. The relevant small business must have aggregated turnover of less than $5 million.

The offset is based on the proportion of your income tax that relates to your total net small business income and is capped at $1,000. Companies are not eligible for this individual offset. The ATO normally works it out from the information in your tax return.

Typical actions

  • Confirm whether your business is a small business entity.
  • Work out your net small business income for the year.
  • Lodge your individual tax return including business income.
  • Check that the offset appears on your Notice of Assessment.
  • Speak with a registered tax agent if unsure how to include partnership or trust distributions.

Official ATO sources

Last checked: 25 August 2026

Small business income tax offset
ATO page explaining eligibility and how the offset works.

Business offsets and rebates
Overview of business tax offsets, including the small business income tax offset.

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Important notice: Tax Clarity is an independent information tool. This page provides general information based on official sources. It does not provide tax, legal, financial, or accounting advice. Tax rules can change, and how they apply depends on your circumstances. For advice about your situation, speak with a registered tax agent or qualified professional.

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