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We are currently in the process of tax planning for our small business clients and one strategy that has been very effective for our clients is the $20,000 immediate asset write-off.
This incentive allows businesses to invest in depreciable assets (new or second hand) costing less than $20,000, and claim 100% of the business use portion of the asset in their current year tax return without the need to depreciate the asset over time. So, if your business purchased a depreciable asset costing $15,000 with 100% business use, and you are trading through a company structure, the potential tax saving is $4,125 (being $15,000 x 27.5% company tax rate).
So who is eligible to deduct these assets? Basically, you need to be eligible to use the simplified depreciation rules (i.e. a small business with a turnover less than $10 million) and the asset needs to be first used or installed ready for use in the income year you are claiming it in.
There is a small catch... if you want to be able to claim the immediate asset write-off, any assets costing over $20,000 must be pooled.
The great news is that in yesterday's Federal Budget, the government has extended this concession for another 12 months, meaning that small businesses can continue to depreciable assets costing less than $20,000 until 30 June 2019 and receive the tax deduction up-front. It is proposed that from 1 July 2019, the asset threshold will revert back to the previous $1,000 limit.
Want to see how your business can benefit from the small business asset write-off, give us a call on 0438 018 348.
General Advice Warning - The information in this article is educational and general in nature. It does not take into consideration your personal financial information, goals and objectives. Please ensure you seek appropriate financial and taxation advice.