The Instant Asset Write Off - Your Questions, Answered
The most recent Federal Government budget was handed down a few months ago, but this is the first tax time since then, so it’s worth revisiting how you can get the most benefit for your business going forward from the measures that were announced.
The budget was dubbed “the small business budget” by media observers and analysts for the range of measures that were contained in it specifically to benefit the millions of small businesses and medium sized enterprises across Australia.
But none caused as much excitement and confusion as the $20,000 instant asset write off, so here are the most frequently asked questions.
Is It Official Yet?
It’s a strange quirk of the system of government we have in Australia that a government can announce anything it wants, but that does not automatically make it law. The measure must still get through parliament to become law.
In this case, however, the law commenced on 12 May 2015, and will cease to operate on 30 June 2017.
Who Can Benefit?
To be able to claim the write off, an entity must be a small business entity as defined by the law. That includes having an annual turnover (or revenue) of less than $2 million for the financial year, not the calendar year.
What Were the Old Rules?
The law that this new legislation replaces was one relating to simplified depreciation rules. Those included an immediate deduction for assets that were acquired for less than $1,000. The deduction could only be claimed in the same year as the expense that was linked with acquiring the asset was incurred, so you could not buy a new business car in May last year and claim it next financial year.
What are the Benefits?
Small businesses and medium sized enterprises can claim an immediate deduction for machinery, equipment and business assets that they buy for less than $20,000. There is also no upper limit on the amount of times this can be claimed.
For example, a café that buys a new coffee machine for $4,500, a completely new set of cutlery for $1,000 and a new display fridge for $3,500, it can claim the deduction for each of those items separately. This will mean that if they have a taxable income of $20,000, they can reduce this by the total amount of the deductions to $11,000. That, in turn, means they are liable to pay much less tax.
If you would like tailored, personalised tax advice for yourself, your family or your business, and live in the Bankstown, Moorebank, Prestons, Liverpool, Edmondson Park, or Ingleburn areas, then we would be happy to help you. Simply give us a call on 1300 829 484 or email ATP Tax Accountants any time.