Tax Depreciation Allowance, Tax Free Allowance, Small Business Tax Cut, $20,000 Tax Write off, $20 000 instant asset write-off, $20 000 tax deduction for small businesses... Its known by many names.
What is it?
How does it work?
Do I Qualify?
We asked our good friend Ray Taggart - Taxation & Planning Business Guru, and Principal ofTaggart & Partners
1) What Is It???
The sweetener in the 2015 budget for SMEs was undoubtedly the accelerated depreciation write-off for assets up to $20,000 (up from the previous $1000 threshold).
An important qualifier for this, is the business must fall in the SME category - "A business with an aggregate annual turnover of less than $2 million"
It is essential to understand that this is not a 'rebate' or a 'cash back' it is a depreciation acceleration.
2) What can be included in this?
Any depreciable asset purchased within the set timeline by the ATO can be considered.
- IT hardware such as printers, scanners, desktop computers and photocopiers
- Shop or office furniture and fittings, such as new tables for a cafe or chairs for a hair salon
- Display advertising screens, kitchen equipment and air conditioners
- Tradesperson’s tools and machinery
- Commercial plant and equipment
- Garages or storage sheds for storing equipment.
How About Vehicles?
If you are registered for GST then the ex GST price must be under the $20K ($22,000 inclusive of GST). The on road if included in invoice form part of the vehicle purchase price
| Item | Amount | Item | Amount | |
| Vehicle Price | $20,990 | Vehicle Price | $19,990 | |
| Registration & CTP | $0 | Registration & CTP | $780 | |
| Stamp Duty | $690 | Stamp Duty | $550 | |
| Balance Payable | $21,680 | Balance Payable | $22,320 | |
| Elegible? | Elegible? | |||
| GST Registered | YES | GST Registered | NO | |
| Non GST Registered | NO | Non GST Registered | NO | |
3) Tips
- This tax incentive is ideal for businesses that were considering purchasing assets anyway or have a real business desire to update equipment. If it can improve your net profit then look at taking advantage of this opportunity.
- Details matter.... The instant write off for an asset pool with a value of less than $20,000 would appear to also apply to existing asset pools (Best to speak with your accountant, or one of our team). This could mean businesses with existing asset pools can claim a full tax deduction for that pool for the current financial year if its written down value is less than $20,000.
4) Be Careful!!
- As mentioned above - this is not a grant or allowance, and you should not hurry out to buy any asset before you check with your accountant. If your business is not breaking even, or making a profit then a tax deduction is of no use to you.
- Don’t sign unnecessary debt just to chase a tax deduction.
- Don’t be tempted to break the rules in order to claim the deduction.The ATO watch closely and will devote compliance personnel resources to study these claims.
- Be careful of the definition of “small business,” especially if you are part of a larger group. To qualify for these concessions, your business must align with the Australian Taxation Office's definition of a small business; an individual, partnership, company or trust with an aggregated turnover of less than two million dollars.
Once you know all your options, you can proceed with confidence knowing that you're avoiding mistakes, both big and small. Having properly weighed up your business needs vs wants, you can decide to apply for a comfortable loan that you can both afford and repay. Sourcing the necessary equipment or machinery your business needs to increase productivity and efficiency will mean your business is well on its way to running like a well-oiled machine.
