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Simplified Tax System for small business.

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The Government today introduced legislation into the Parliament to implement the Simplified Tax System (STS). Businesses with an average annual turnover of less than $1 million can elect to join the STS from 1 July 2001.

The STS will deliver a number of benefits by reducing the time and money that participating small businesses need to spend on bookkeeping and income tax compliance. Participating small businesses will also benefit from being able to immediately write off purchases costing less than $1000. Assets costing $1000 or more and with effective lives of less than 25 years are pooled and written off at 30 per cent per year, or 5 per cent per year for assets with effective lives of 25 years or more, using the declining balance method.

The Bill also completes the Government's changes to the rules for prepayments, as recommended by the Review of Business Taxation.

The release of Exposure Draft legislation in October this year provided the small business community with the opportunity to contribute to the development of the STS, and again demonstrates the Government's commitment to consult on the implementation of business tax reforms. Following consultation with small business representatives, the Government has decided to improve certain provisions of the STS Bill including:

simplifying the calculation of trading stock values; ● increasing the depreciating assets threshold from $2 million to $3 million; and ● relaxing the control tests to avoid inadvertent grouping. ●

The STS relies on some of the concepts and definitions used in the Uniform Capital Allowances (UCA) system, which begins on 1 July 2001. This measure will result in a simplification of depreciation. The Government will soon be releasing for public comment Exposure Draft legislation for the UCA system.

The New Business Tax System (Simplified Tax System) Bill 2000 , and its Explanatory Memorandum, may be obtained from the Parliamentary website ( Small businesses and their advisers who would like more information on the STS can call the Business Tax Reform Information Line on 1300 137 619 or visit the ATO's Tax Reform website (

CANBERRA 7 December 2000

Contact: Geoff Miller (ATO), Tel: (02) 6216 1483