The government has upped the ante on the instant asset tax write-off $30k, extending the scheme to 2020. YBI explains what this means and how you can use it to benefit your business before the EOFY.
With the end of the financial year fast approaching, are you up to date with how your business can cash in? This year’s federal budget offered a series of sweeteners for small business and the biggest cherry in the pie was the extension of the instant asset tax write off. Businesses with a turnover of $10 million dollars or less are eligible to take advantage of the scheme which has been extended to June 30, 2020. The instant asset write-off allows businesses to deduct the cost of capital assets purchased (up to the value of $30k each).
According to MYOB CEO Tim Reed, the government’s decision to extend the $30K instant asset tax write-off is welcome news for SMEs. “It encourages business growth and is exactly the type of measure that delivers confidence to the business community.”
Reed should know, the accounting solution’s most recent survey of small business owners suggests it a policy close to their hearts. Seven out of 10 small to medium business owners interviewed said the policy should be permanent. It was the most sort after inclusion in this year’s budget.
So now that it’s been confirmed. How can SME’s make use of this opportunity?
Prior to the government’s introduction of the instant asset tax write-off, business owners would have to wait for years for depreciation of their purchases to kick in. Thanks to the extension of the instant asset tax write-off this is no longer the case.
No matter what type of small business you own there is an opportunity to invest in new capital assets and immediately write-off their value if purchased prior to the end of financial year.
If you have been holding off upgrading your tech, for example, this could be a great time to replace those old computers, scanners and printers. Similarly, you might want to consider updating your shop fixtures, point-of-sale devices, work vehicles or tools of the trade.
The extension of the policy is also good news for advisers and accountants as small business owners seek advice as to how to best make their purchases.
Another important item to note is that it is not a $30k cap but rather up to $30k for each purchase. So, for example, you could purchase 10 new laptops for your staff under one purchase at say $29k. Then make another purchase of POS equipment for your business and another for shop fixtures. As long as each purchase comes in under the $30k mark, you’re laughing!
So how does it work? By purchasing business assets up to $30,000, you are decreasing your taxable income by that same amount. So instead of that money being tied up in your business waiting for years for the asset to depreciate, you can claim the asset instantly, decreasing your income and the tax payable.
However, before you go out willy-nilly purchasing new business assets it’s always important to consider how these new purchases may affect your cash flow. Remember it’s always a good idea to speak with your accountant or adviser to see if investing in this kind of asset is will work for you.
And don’t forget you need to claim the instant asset write-off the same year you purchase the assets or install them for use in your business. So, if you want to take advantage of the scheme this year, you need to purchase the assets and submit your claim before June 30.