Aggregated turnover is the figure the Australian Taxation Office uses to size up your business for small business tax concessions. It combines your own annual turnover with the annual turnover of every entity connected with you and every entity that is your affiliate, then strips out GST and dealings between those related parties. Section 328-115 of the Income Tax Assessment Act 1997 sets the rule, and getting the number right decides whether you qualify for the concessions sitting at the $2 million, $5 million, $10 million, and $50 million thresholds.1Australian Taxation Office. TD 2021/7 – Income Tax: Aggregated Turnover
What Counts as Your Annual Turnover
Annual turnover is the total ordinary income your business earns during the income year in the ordinary course of carrying on a business.2Australian Taxation Office. Definitions It captures revenue from selling goods, providing services, and any other income stream that is part of how you normally trade. If the business did not operate at any point during the year, the annual turnover for that year is zero.
Two features of this definition catch people out. The first is that it is worldwide. Revenue earned overseas is included, and the ATO explicitly folds the annual turnover of overseas entities into the aggregated calculation.3Australian Taxation Office. General Information The second is that annual turnover is a gross figure. You do not subtract wages, rent, materials, or any other cost of doing business before comparing it against a threshold. Only the specific items covered below come out.
A part-year business needs to estimate what its annual turnover would have been across a full twelve months. This stops a business that started trading in March from looking artificially small on four months of income.
Income from non-business activities stays out. The private sale of a personal car or home is not ordinary income from carrying on a business and does not enter the calculation.
Which Other Entities Get Added In
Aggregated turnover is never just your own revenue. It combines your annual turnover with the annual turnover of every entity connected with you, plus every entity that is your affiliate.1Australian Taxation Office. TD 2021/7 – Income Tax: Aggregated Turnover Two different tests decide who is in that group.
Connected Entities
An entity is connected with you if either entity controls the other, or if a common third party controls both. Control exists at a lower bar than most business owners expect. You, your affiliates, or you together with your affiliates only need to hold interests carrying at least 40% of any income or capital distribution rights, or at least 40% of the voting power in a company, for the control test to be met.4Australian Taxation Office. TD 2022/6 The threshold sits below a majority stake because the ATO treats that level of ownership as enough to exercise real influence.
The test runs in both directions. If you hold 40% of another company, that company is connected with you. If another entity holds 40% of yours, you are connected with it. And if a third party holds 40% of both your business and someone else’s, those two businesses are connected with each other through the common controller. Each connected entity’s full annual turnover joins your aggregated figure.
Affiliates
An affiliate is an individual or company that acts, or could reasonably be expected to act, in accordance with your directions or wishes, or in concert with you, in relation to their business affairs.5AustLII. Income Tax Assessment Act 1997 – Sect 328.130 This is broader and more subjective than the 40% ownership rule. Someone does not become your affiliate just because of the ordinary shape of a business relationship: a supplier who follows your specifications is not your affiliate merely because you set the contract terms.
The test targets situations where one party effectively directs another’s business decisions without any formal ownership stake. A family member running a separate business under your guidance, or a company that consistently defers to your commercial strategy, can be treated as an affiliate. If they are, their entire annual turnover folds into your aggregated total.
What Comes Back Out
Three categories are stripped from the combined figure so it reflects the real economic scale of the group rather than double-counting.
GST. Any GST included in revenue is excluded, because those amounts are collected on behalf of the government and are not income of the business. Annual turnover is a GST-exclusive figure.2Australian Taxation Office. Definitions
Dealings between connected or affiliated entities. Income your business earns from a transaction with a connected entity or affiliate is excluded, and the same applies to income flowing between two of your connected entities or affiliates. Without this rule, a management fee paid from a subsidiary to a parent would inflate the group’s combined turnover by counting the same money twice.6Australian Taxation Office. CGT Small Business Entity Eligibility
Income earned outside the relevant period. If another entity was connected with you for only part of the income year, you only count its turnover for the period the connection existed. Revenue it earned before or after that window does not count.1Australian Taxation Office. TD 2021/7 – Income Tax: Aggregated Turnover
Why the Number Matters: The Threshold Tiers
Aggregated turnover exists as a concept because the concessions it gates come in tiers. Each threshold opens a different set of benefits, and eligibility is all or nothing at each level.
- Under $2 million. Access to the small business capital gains tax concessions, which can reduce, defer, or eliminate capital gains on the sale of active business assets. A separate pathway into these concessions runs through a maximum net asset value test of $6 million across you, your connected entities, and your affiliates.7Australian Taxation Office. Maximum Net Asset Value Test
- Under $5 million. The small business income tax offset, which reduces tax payable on business income for sole traders, partnerships, and trusts.8Australian Taxation Office. Concessions for Eligible Businesses
- Under $10 million. Small business entity status, which unlocks simplified depreciation rules and the instant asset write-off. For the 2025–26 income year, that write-off covers the full cost of eligible assets costing less than $20,000. The small business restructure roll-over also becomes available, letting you move active assets between related entities without triggering an immediate tax event.9Australian Taxation Office. Small Business Support – $20,000 Instant Asset Write-Off8Australian Taxation Office. Concessions for Eligible Businesses
- Under $50 million. Base rate entity status for companies, which means a 25% company tax rate instead of 30%, provided no more than 80% of assessable income is passive income like interest, dividends, rent, or royalties. Simplified trading stock rules and immediate deductions for prepaid expenses covering 12 months or less that end in the following income year also apply.10Australian Taxation Office. Tax Rates 2025-26
Missing a threshold by any margin disqualifies you from that tier entirely. There is no sliding scale.
How to Establish Your Status for the Year
You do not always have to wait until the income year ends to know where you sit. Three pathways lead to small business entity status, and each fits different circumstances.
Prior year actual turnover. If your aggregated turnover in the previous income year came in below the relevant threshold, you qualify for the current year. This is the simplest route because the numbers are already final. Businesses with stable revenue lean on this method.
Current year estimate. If prior year turnover exceeded the threshold, or you are new and have no prior year, you can still qualify by reasonably estimating that current year aggregated turnover will land below the limit. The estimate must be made in good faith and grounded in real evidence: signed contracts, historical trends, or documented market changes. The ATO can challenge an estimate that was unreasonable at the time it was made, not just wrong in hindsight.
End-of-year actual turnover. After the year closes, calculate the actual aggregated figure. If it is below the threshold, you qualify retrospectively. The trade-off is that you cannot apply concessions during the year while waiting on the final number.
Whichever pathway you use, keep records showing how you arrived at the number. The ATO expects invoices, financial statements, and ownership documentation on request.
Where the Calculation Goes Wrong
The most common error is missing a connected entity. Owners think of aggregated turnover as their revenue plus a subsidiary’s revenue and overlook a trust, a spouse’s company, or a joint venture where they hold a 40% interest. Because the control bar sits at 40% rather than a majority, arrangements that feel arm’s length can still be caught.
The second common mistake is reading the affiliate test too narrowly. Affiliates need no formal agreement or shareholding. If the ATO can show that another business consistently acts in line with your wishes regarding its commercial affairs, that entity’s turnover gets added to yours whether you own a single share in it or not.
A third trap involves the inter-entity exclusion. Some businesses exclude every transaction with a related party, when the exclusion only applies to dealings with entities that are connected with you or are your affiliates at the time of the dealing. If you sold goods to a company that later became connected with you, that earlier sale is not excluded, because no connection existed when the income was earned.
What It Costs to Get It Wrong
Claiming concessions your aggregated turnover did not actually support carries real consequences. The ATO typically reverses the concessions on assessment, so you owe the tax plus interest from the original due date.
An administrative penalty for a false or misleading statement can sit on top of that. Where the underpayment resulted from a failure to take reasonable care, the base penalty is 25% of the shortfall. Recklessness raises it to 50%. Intentional disregard of the law attracts 75%.
Record-keeping failures carry their own price. Failing to keep or retain records required under the tax law attracts a flat penalty of 20 penalty units.11Australian Taxation Office. PS LA 2005/2 – Penalty for Failure to Keep or Retain Records As of late 2024, one Commonwealth penalty unit is $330, putting that fine at $6,600.12Australian Financial Security Authority. Penalty Units The calculation itself is the cheap part to get right; the cost of getting it wrong is what makes the discipline of tracking connected entities and affiliates worth the effort.