The Federal Governments tax laws allowing small businesses to immediately claim a deduction for assets purchased costing less than $20,000 will now end on the 30th June 2018.
There is no limit on the number of assets the business can claim in a year as long as each assets cost is less than $20,000. It is important to note that the less than $20,000 threshold is applied on a GST exclusive basis where the business is entitled to claim the GST credits with respect to the purchase and on a GST Inclusive basis for non GST registered businesses. Please note that stamp duty payable on the purchase of assets is included in the less than $20,000 threshold even if paid separately.
The tax benefits can be a great advantage for small businesses depending on the individual businesses circumstances. For example, if a small company operating a business makes a profit of $50,000, the tax payable at the new company tax rate of 27.5% would be $13,750. If the business purchases a qualifying asset for $19,999, the immediate depreciation write off would reduce the taxable profit to $30,001 with a tax payable amount of $8,250.28. A tax saving of $5,499.72.
If this same business purchased three other qualifying assets costing $15,000, $10,000 and $5,000, the immediate asset write off would reduce the profit from $50,000 to $1 with a tax payable amount of $0. A tax saving of $13,750. Please note that the tax savings also apply to businesses ran as a sole trader, partnership and trust with the savings based on the marginal rate of tax for that entity.
Are you eligible?
To use the instant asset write-off, you need to be an eligible small business.
To be eligible:
- You must be operating a business;
- Your business or if you have more than one business, the combined turnover is $2 million or less;
- Assets can’t be purchased for hiring or renting out including to a related business; and,
- The assets need to be purchased and delivered or installed ready for use before 30th June 2018.
Depending on the type of business you operate examples of assets a business can purchase, may include: vehicles, computers, recording and sound equipment, camera, furniture, hot water system, air conditioning units, farm equipment, cash register, gym equipment, refrigerator unit, coffee machine, gardening equipment, trailer and much more.
To ensure there is sufficient time to implement any strategies before 30 June this year, please contact your Wardle Partners Advisor as soon as possible and they will be more than happy to discuss your options. Alternatively, if you would like to discuss financing options, please feel free to contact Cameron Blair direct on 0437 652 603.