Small business tax write-off measures that were introduced in a previous Federal Budget allowing small businesses with a turnover up to $2million to immediately deduct assets of up to $20,000 per item, instead of having to claim deductions over a number of years has been proposed to be extended until 30 June 2018.
The turnover threshold for the year ending 30 June 2017 was been increased to $10 million. The proposed changes also allow businesses with turnover up to $10 million to claim this depreciation concession up to 30 June 2018.
It is important for small business to understand this measure thoroughly as there are some restrictions and stipulations in place that take into account how the purchase was made and how annual turnover is assessed.
Also, if you are eligible, it is important to remember that you won’t be refunded on a dollar for dollar basis.
So, what is included?
- Work vehicles
- Shop and office fittings, fixtures and furniture
- Signage, display screens and airconditioners
- IT, including desktop computers, printers and photocopiers
- Sheds and storage boxes for storing equipment
- Tools and machinery (trades)
- Plant and equipment
- Applies to the purchase of new and second-hand goods
- Some computer software
- Inhouse software
- Land and some intangible assets such as goodwill
- Stock for trading
What we advise
It is advisable that you think very carefully before taking on a debt to chase a tax deduction so think carefully. We recommend you seek advice regarding the implications of borrowing to purchase assets as utilising loans for asset purchases will impact the cash flow of your business.
By all means use this to your advantage to purchase items that will enhance your business and help it grow. Also make sure your business meets the Australian Tax Offices definition of a small business – an individual, partnership, trust or company with an annual turnover of less than $10million.
We are working with many small businesses to ensure that get the best advantage from this scheme so please don’t hesitate to contact us for advice and guidance.
More information is also available on the ATO website at https://www.ato.gov.au/Newsroom/smallbusiness/Lodging-and-paying/Get-your-$20,000-instant-asset-write-off/