The $30,000 Tax Incentive for Small Business Owners

small business owner camera looking down a long piece of wood that is being cut by a circular saw and a man in jeans and a white shirt standing at the point where the saw is holding the wood down cutting inside a lounge room type area. Instant asset tax write off

What better time to splash some cash than around the time of a federal election campaign and what better way to secure the votes of small business then to offer a great big tax incentive.

The federal budget announcement regarding the instant asset tax write off scheme, in April, was one of the small business tax incentives that perhaps helped secure their position as leaders after the election.

The coalition announced it will increase the instant asset tax write off threshold from $25,000 to $30,000 and expand the eligibility to companies with turnovers of up to $50 million.

The Coalition Party Small Business Sweetener

So How Does the Instant Asset Write Off Work?

Assets costing less than the applicable instant asset tax write off threshold are 100% written off in the year they are bought and used (or installed ready to use).

Small business operators and owners will get the benefit of an immediate deduction, rather than depreciating an asset over the term of its useful life. This applies whether the asset is new or second hand.

This is not a refund. The instant asset tax write off is a tax deduction that reduces the amount of tax your business has to pay.

What Assets Are Included?

  • Assets that cost less than $30,000 (if acquired between 2 April 2019 and 1 July 2020).
  • Assets that are directly related to your business’s income producing activity e.g. computers, phones, vehicles, tools, machinery, equipment, websites etc.
  • Certain structures of agricultural property that would normally classify as capital works.

What Assets Are Not Included?

  • Purchases that cost more than $30,000
  • Any assets leased out (or expected to be leased out) for more than 50% of the time on a depreciating lease.
  • Assets allocated to a low-value pool
  • Horticultural plants – e.g. grape vines.
  • Capital works including buildings and structural improvements (written off over a longer time).

 

The instant asset tax write off scheme can be useful in tax planning for businesses who want to bring forward capital expenditure.

It is important to remember that you still need the cash flow available to make these eligible asset purchases.

If you are considering making a business asset purchase you should talk to your accountant first. As accountants, we can help you determine if this is the right time for your business to make a purchase and utilise the instant asset write off scheme.

Please feel free to complete the form below to get in touch with our Business Services team. Alternatively you can contact us on (02) 43 53 2333.