Small business tax offset: can working holiday makers with an ABN claim it?

What is the small business tax offset?

The small business tax offset (also called the unincorporated small business tax discount) is a concession for small business sole traders and partners:

• Reduces income tax payable on business income
• Current rate: 16% of tax payable on business income
• Maximum benefit: $1,000 per income year
• Applies to ABN sole trader and partnership income
• Non-refundable (can reduce tax to zero, no further benefit)

It exists to provide some tax relief to small business owners who do not have access to the lower company tax rates available to incorporated businesses.

Who can claim the small business tax offset?

To qualify, you must:

• Be an individual taxpayer (sole trader or partner in a partnership)
• Have aggregated annual turnover under $5 million (almost no working holiday maker hits this)
• Have business income earned under an ABN
• Not be a company or trust

For working holiday makers operating under an ABN, the turnover requirement is essentially never an issue. The offset applies if you had ABN income at all.

How much is the offset worth in practice?

Examples for working holiday makers:

• $5,000 ABN income → small business offset around $120 (16% of 15% tax on $5,000)
• $15,000 ABN income → small business offset around $360
• $30,000 ABN income → small business offset around $720
• Higher ABN income → capped at $1,000

The offset reduces the tax owed on the business income portion of your return, not your wage income.

Can the offset be combined with other offsets?

Yes. Multiple offsets can apply to the same return:

• Small business tax offset: reduces tax on business income (max $1,000)
• Low income tax offset: reduces tax based on total income (see low income tax offset article)
• Medicare Levy exemption: removes the 2% levy (most working holiday makers eligible)

Each is calculated separately and applied to your final tax position. Our team identifies and applies every eligible offset when preparing your return.

What if you earned both ABN and TFN income?

Common for working holiday makers (employee work alongside contracting):

• Your wage income (TFN) is taxed at the 15% working holiday maker rate
• Your business income (ABN) is also taxed at the 15% working holiday maker rate
• Both are reported on a single tax return
• The small business offset applies only to the ABN income tax
• Other offsets and deductions apply across both

This interaction makes professional lodgment worthwhile. We have lodged returns for many working holiday makers with mixed income and know how to maximise the result.

How do you claim the small business tax offset?

The offset is not automatic - it must be calculated and applied at lodgment:

• The ATO does not apply it for you automatically
• Self-lodgers often miss it
• Our team calculates and applies it for every eligible ABN holder
• Get in touch if you had ABN income and want to make sure you are claiming it

If you have already lodged a return without claiming the offset, we can amend the return to claim it retrospectively (typically up to two years after the original lodgment).

Get in touch with our team for help registering an ABN, managing GST and BAS, or sorting out your end-of-year tax position correctly.