Extending the $20,000 asset tax write-off scheme once again is another win for small business tax deductions. The Australian federal government’s recently announced 2018 budget on 8 May. Which continues the favorable environment for over three million Australian small business owners needing that helping hand to grow and prosper.
Forty percent of small business fail due to a lack of capital. The 2018 budget measure will improve cash flow, providing an additional boost to small business activity for another 12 months. Thereby encouraging investment by replacing or upgrading facilities and assets. Besides improving your cash flow, the small business will have more flexibility to hire more employees and sell more. Businesses with an annual turnover of up $10 million will now have until June 30, 2018, to immediately deduct eligible assets up to the value of $20,000.
The $20,000 asset tax write-off covers
If you are running a small cafe, you might need new kitchen equipment, or new tables and chairs. If you’re a tradesmen, you might need new tools, another truck or machinery to take on more work. Vehicles, factory or computer equipment under $20,000, In other words, any asset used to produce an income is eligible for this small business tax deduction scheme.
Changes to $20,000 asset tax write-off
Before the Budget 2015 announcement, SMEs would immediately deduct business assets costing less than $1,000. On Budget night, the Treasurer stated that the threshold for the immediate deduction will increase to $20,000 on 12 May 2015. Small businesses with an aggregated turnover less than $2 million where this threshold will increase to $10 million from July 2017.
This $20,000 asset tax write-off is very popular among the small business community. In a pre-budget poll of SmartCompany readers, 60% said they were hoping the government would make the scheme permanent. Peter Strong, CEO of the Council of Small Business of Australia, told SmartCompany his members widely endorsed the scheme is. It seems that the $20,000 asset tax write-off is here to stay.
$20,000 asset tax write-off eligibility
A business that meets the definition of a small business entity, that is one with an accumulated turnover less than $10 million. Is eligible to claim an immediate deduction for the cost of depreciating assets acquired for less than $20,000. Another small business tax deduction can be claimed for prepaid expenses that stretch forward for up to 12 months. You can claim a deduction this year if you pay for next year’s insurance policy, utility bill before 30 June.
What if write-off is over $20,000?
Assets over $20,000 can be fully written off, but not immediately. Businesses can group assets that go beyond the threshold in order to depreciate them at the same rate (15% in the first year, 30% for every year after that). The package is designed to stimulate the economy by helping businesses to grow. Spending stimulates the economy and increases cash to other businesses. Capital investment is extremely effective in creating employment and growth. Therefore increasing company profit and with higher profit there will be more opportunity for investment.
What is not covered by the scheme?
Assets over $20,000 are not eligible for the instant tax write-off, however they can be fully written off over a longer period of time. The following assets however are excluded:
- Buildings or extensions
- Structural improvements in-house software horticultural plants
Small Business Tax Deduction
- Second hand goods are deductible, regardless if the asset you are buying is new or second hand, you still can claim the deduction.
- For business use not personal. The tax deduction can only be claimed on the business percentage not personal percentage.
- For example; if you purchased a car and use it 80% for business and 20% for personal use, only that 80% can be claimed.
- Assets should be ready to use – If you access the $20,000 immediate deduction, as a business owner you should start using the asset in the financial year that you purchased it or have it installed ready for use.
- Is the purchase relevant, you need to make sure that there is a relationship between the assets purchased by the business.
- A business must generate income with that purchase and be applicable to the services or products provided.
How to apply the $20,000 asset tax write-off
- write off eligible assets costing less than $20,000 each
- pool most other depreciating assets that cost $20,000 or more
- write off the small business pool balance if it is less than $20,000 at the end of an income year
- only claim a deduction for the portion of the asset used for business or other taxable uses.
- the $20,000 asset tax write-off threshold now applies until 30 June 2019.
Unsecured business loans designed with speed and simplicity. Ease of repayments through daily, weekly or even monthly programs and automatically deducted from your bank account. There is no need to write a check, no transfers and no surprises, it is short-term business finance without any stress.
Overall big and small business has largely backed the Treasurer’s 2018 budget. Entrepreneurs can be smart and take advantage of this small business tax deduction. The $20,000 asset tax write-off for 2018 / 2019 can fund tools and equipment when businesses are short on cash.
Accrutus Capital can help new business owners with less than 2 years trading history, no financials and no security. Offering working capital finance solutions where your credit may not be perfect. Your small business tax deduction should be discussed with your accountant. Call Accrutus Capital on 02 9006 1327 to discuss how to take advantage of this small business tax deduction.
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