Instant asset write-off increased to $30,000 until 30 June 2020

BMT team — Tue, 07 May 2019 04:05:02 +0000

UPDATE – The Australian Government has announced a $17.6 billion economic plan in response to the challenges posed by the coronavirus, including increasing the instant asset write-off threshold. Click here for more information. In good news for small and medium business owners, the federal government wasted no time in passing changes to the instant asset write-off scheme outlined in the 2019 Federal Budget. The instant asset write-off threshold was increased from $25,000 to $30,000 and eligibility extended to businesses with annual revenues of less than $50 million. This allows these business owners to immediately write off depreciable assets that cost their business less than $30,000. Business owners can therefore claim a deduction for an asset in the same income year as the asset was purchased. In a tighter economic climate, these amendments provide small to medium business owners with the opportunity to invest in new essential items whilst minimising the impact on their cash flow. However, the rules are much more complicated and it’s important for business owners to understand how these changes will affect them and why they should seek guidance from a Quantity Surveyor and an Accountant before lodging their annual income tax return this year. In this article we will look at: What is an eligible asset? What do the changes mean for business owners and their Accountants? What happens when the new instant asset write-off rules end? BMT Tax Depreciation are experts in small and medium business depreciation What is an eligible asset? Small and medium business owners can use the instant asset write-off for any depreciable plant and equipment asset or fit-out installed in their business. The pool of eligible deductible items is broad and ranges from office furniture, blinds, workstations and light fittings to more specific industry assets such as commercial ovens in restaurants, bedding and furniture in hotels, barber chairs and cutting and styling workstations in hair dressing salons and medical or manufacturing equipment. However, the instant asset write-off applies only to certain depreciable assets. There are some assets that don’t qualify such as capital works (building construction costs) and assets leased to another party on a depreciating asset lease. What do the changes mean for business owners and their Accountants? As there have been a number of changes to the instant asset write-off rules in recent years, the amendments mean there will be three threshold tiers for businesses and their Accountants to consider for the 2018/2019 financial year: The first tier applies to depreciable assets valued less than $20,000 acquired before the 29th of January 2019 The second tier applies to depreciable assets valued less than $25,000 first used or installed between the 29th of January 2019 and the 2nd of April 2019 The third tier applies to depreciable assets valued less than $30,000 first used and installed after the 2nd of April 2019 Budget announcement and before 1 July 2020 The first two tiers will apply only to businesses with an aggregated annual turnover of less than $10 million, while the third tier is available to small to medium businesses with an aggregated annual turnover of less than $50 million. The rules revolve around the aggregated annual turnover of the business, which may change from year to year, potentially impacting the deductions they are eligible for in future years. Businesses should always seek guidance from their Accountant when determining the correct thresholds to apply. Assets that don’t qualify for the instant write-off can be depreciated using their effective life or, where eligible, by allocating to an accelerated low-value pool. The decline in value of a depreciating asset is generally calculated using its effective life as set by the Commissioner of Taxation outlined in Tax Ruling (TR2018/4), which is determined by how long it can be used to produce income. This considers: Whether it’s subject to wear and tear at a reasonable rate Whether it’s maintained in reasonably good order and condition The period within which it is likely to be scrapped, sold for no more than scrap value or abandoned The effective life is used to work out the asset’s decline in value (or depreciation) for which an income tax deduction can be claimed. Small businesses can add assets with a cost equal to or more than the instant asset write-off threshold and receive a 15 per cent deduction in the year of purchase and installation ready for use and a 30 per cent deduction from the second year onwards. At the end of an income year where the balance of the pool at the time, before applying depreciation deductions, has a total depreciable value of less than the applicable threshold, the remaining un-deducted value of the pool can be claimed in full. What happens when the new instant asset write-off rules end? From the 1 July 2020, the threshold will revert back to $1,000 for small business entities only. Medium sized business will need to work out their asset’s decline in value under the ordinary depreciation provisions after 30 June 2020. BMT Tax Depreciation are experts in small and medium business depreciation Given the complexities around the instant asset write-off, it’s more important than ever to work with a specialist Quantity Surveyor like BMT Tax Depreciation to ensure all asset deductions are identified and claimed correctly under this new ruling. Whether you’re purchasing a business which owns buildings and/or plant and equipment assets or you’re planning to purchase new plant assets and write-off existing ones, BMT can create a new depreciation schedule or update an existing one to ensure deductions are calculated correctly. Request a Quote today for a free estimate of your likely deductions or contact one of our expert staff on 1300 728 726.

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Tax break continues to help small business owners

BMT team — Fri, 09 Nov 2018 03:30:19 +0000

In a move that will help boost cash flow for small business owners, the Senate recently passed legislation to extend the $20,000 instant asset write-off to June 2019. Initially introduced in May 2015, the Australian government originally allowed small businesses with an aggregate turnover less than $2 million to claim a $20,000 instant asset write-off. In March 2017, as part of Treasury Laws Amendment (Enterprise Tax Plan) Bill 2016, the definition of a small business was extended and the $20,000 instant asset write-off was extended to include those enterprises with an aggregated turnover of less than $10 million. During the 9th of May 2017 federal budget, the instant asset write-off was extended until the 30th of June 2018. In 2018, the federal budget proposed to extend the legislation once more and after a long delay between May and September, the extension of the legislation to June 2019 was passed by the Senate on the 12th of September 2018. If you’re planning on using this tax break before the next financial year, it’s important you know exactly how it works. Why not put more money back in your pocket? this is a great time to help upgrade your small business for the long term. Let’s take a look at an example scenario of how one investor can take advantage of the instant asset write-off: Alice is a Chef with a small cafe she runs with her sister Sophie. Their rapidly expanding business is doing extremely well, and they’ve been thinking about purchasing new plant and equipment assets to help their business continue to grow and expand. Alice and Sophie would like to update the old espresso machine, replace their commercial fridge and look at installing a new security system. Alice and Sophie can buy a new espresso machine and take advantage of the $20,000 instant write-off as the new machine will cost them only $5,137 They can also purchase a larger cool room for $7,249, replacing their existing commercial fridge. This will cost less than $20,000 and will also be a valid purchase they can deduct immediately They can also choose to buy a higher end security system for the café and claim an immediate write-off for this item because the purchase price is just $2,229. Learn more: Order a commercial tax depreciation schedule Small business owners can use this instant asset write-off for any depreciable plant and equipment asset or fit-out installed in their business. Other examples of deductible items can range from office furniture, blinds, workstations and light fittings to more specific industry assets such as hospitality, medical or manufacturing equipment. It is more important than ever to work with a specialist Quantity Surveyor to ensure that all asset deductions are identified and claimed correctly under this new ruling. BMT Tax Depreciation can show you how to claim more deductions, pay less tax and see a greater return on your business. Request a quote today for a free estimate of your likely deductions or contact one of our expert staff on 1300 728 726.

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Instant asset write-off increased to $30,000 until 30 June 2020

Tax break continues to help small business owners