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| Home » Topics on Tax » Simplified tax system |
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Simplified tax system (STS) |
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Simplified tax system (STS) is an alternative method of ascertaining taxable income for eligible small businesses with straightforward financial matters. To be eligible for the simplified tax system (STS) in an income year you must fulfilling certain things. These are:
You should have simplified tax system (STS) average turnover for that year of less that $1 million.
You must be carrying on a business in that year and
You must be holding less than $3 million in total of adjustable values of depreciating assets.
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The simplified tax system (STS) has three main elements. These elements are:
Modified trading stock rules where businesses need to carry on stocktakes and account for changes in the measure of trading stock in limited circumstances.
A cash calculating method that acknowledges most business income and expenses only when they are accepted and paid.
Simplified capital allowance rules where most devaluating assets being less than $1,000 each are written off directly. Most other depreciating pluses are pooled and deduced at a rate of either 30% or 5% depending on their effectual life.
In addition, simplified tax system (STS) taxpayers can claim a full subtraction for certain prepaid disbursements. To participate in the STS is optional. If you want to enter the STS you will have to use all three elements, where they apply. The STS applies to the entire income years, not the parts of a year.
The simplified tax system (STS) has very simple trading stock rules. If you are an STS taxpayer you can conduct a stock take for tax purposes during the end of the income year and calculate for changes in the value of merchandising stock if you find a difference of more than $5,000 between the value of stock with you at the start of the income year, and a fair estimate of the economic value of your stock on hand at the end of the income year. Still you can conduct a stock take and answer for the change in the value of trading stock in any income year.
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