It’s ending soon…hurry don’t miss out on the $20,000 instant asset write-off!
If your business has turnover of under $2 million, then since 7.30pm on 12 May 2015 you have been able to immediately claim a tax deduction on eligible business capital assets costing less than $20,000 (excluding GST if you are registered for GST, or including GST if you are not registered).
Were you aware this is changing from 1 July 2017? The threshold will decrease from $20,000 back down to $1,000. That means you only have a few more months to take advantage of this deduction. To claim the immediate deduction in 2016/17 year, the asset must be first used or installed ready for use in your business on or before 30 June 2017…so don’t get it delivered and installed on or after 1 July 2017!
Just like any business decision the motivating factor should not be the tax benefit alone. Ask yourself “Do we really need this asset?” “Do we have the funds available?” What will be the effect of this purchase on our future cashflows?” “Will we have profit to claim the tax deduction against?”
Cashflow is king in any business. If there is business equipment you need and it is of commercial benefit and if your analysis of cashflow supports the purchase, then go ahead and spend the money before 30 June 2017. The extra kicker is you can apply the $20,000 immediate write-off to multiple individual purchases. So if you buy 5 cars for $19,999 each before 30 June you can claim an immediate tax deduction of $99,995.
But remember: this is the tax deduction, not the actual tax saving. The tax saving will depend on your effective tax rate. So for example assuming you are a small business entity with an effective tax rate of 28.5%, your tax saving is $28,499 ($99,995 x 28.5%), which means the business has still fully funded the remaining $71,496. You won’t actually receive this $28,499 from the tax office; it will just reduce your tax liability. Further, you won’t receive this tax saving until you lodge the business’ tax return after the end of the financial year, yet you have had to outlay $99,995 at the time of the purchase.
What assets are eligible?
Basically all depreciable assets (including second-hand assets) used in a business are eligible, including; motor vehicles, furniture, computer equipment, plant & equipment, tools, sheds etc.
The following assets however are excluded:
- buildings or extensions, structural improvements
- in-house software
- horticultural plants, including grapevines
- assets that are leased out
Some of the more unknown business assets you can deduct are:
- Guard dogs used as security for business premises
- Art work which is hung in your office reception or in a meeting room
- Ping-pong or pool table, Xbox or TV which is in the staff kitchen or visitor area
- Coffee machine or dishwasher that is in your workplace kitchen
Just remember the asset needs to be genuinely used in your business!
Before you make any big purchase decisions it is best to first chat with us to review your tax position for the financial year and ensure that you are eligible for the concessions. Give us a call on 07 5451 1118 or drop us an email at firstname.lastname@example.org