Concepts
Aggregated turnover
Aggregated turnover is the combined annual turnover of your business, plus that of entities connected with you or affiliated with you, and it is used to test eligibility for small business concessions.
Aggregated turnover is a measure used in the income tax system to decide whether a business is small enough to access certain concessions. It is made up of the annual turnover of your own business plus the turnover of any entities that are connected with you or affiliated with you, less certain amounts that are not counted, such as sales between those related entities. The idea is to stop a larger group splitting itself into small pieces to qualify.
The main use is the small business entity test. A business that carries on a business and has aggregated turnover below the legislated threshold may qualify as a small business entity, and from there may be eligible for concessions such as simplified depreciation rules, simplified trading stock rules and certain other measures. Different concessions can have different thresholds, and those thresholds are set by legislation and can change, so check the current figures on the ATO website.
Working out aggregated turnover involves looking at your connections. If you control another business, for example by holding a significant interest in a company that trades, the turnover of that business may be included. Affiliates, such as a partner or a person who acts in accordance with your directions, can also bring their turnover into the calculation. These tests rely on specific legal definitions, so a simple look at the family tree is not enough.
It differs from GST turnover. GST turnover looks at the sales made by the entity itself to decide whether it must register for GST. Aggregated turnover is broader in the entities it sweeps in, and it is applied for the purpose of income tax concessions rather than registration. A business can pass one test and fail the other, so both should be monitored separately.
The measurement is usually made using the turnover for the previous income year, the current income year or a reasonable estimate of the current year, and a business can generally qualify if it passes on any of these. Turnover is measured excluding GST, so GST-inclusive sales should be adjusted before comparing against any threshold. Keeping a monthly record of sales for each entity involved makes the calculation straightforward.
A common misunderstanding is assuming that only your own sole trader income counts. If you also have a company or a trust that trades, the totals may need to be combined. Another is believing the status stays fixed once reached. You are tested each year, and a growing business can lose access to concessions. This is general information only, so confirm your aggregated turnover with the ATO or a registered tax professional.
Worked example
Sam runs a landscaping business as a sole trader with GST-exclusive turnover of $620,000. He also controls a company that sells garden supplies with turnover of $380,000. His aggregated turnover is $620,000 plus $380,000, which is $1,000,000. That combined figure, not just $620,000, is compared against the small business entity threshold, which is set by legislation and should be checked on the ATO website.
Practical tips
- Include connected entities and affiliates when you calculate aggregated turnover, not just your own business.
- Use GST-exclusive figures when comparing against thresholds, and check current thresholds on the ATO website.
- Review the test each year, since your eligibility for concessions can change as the business grows.