The popular $20,000 instant asset write-off for small business entities, which enables small businesses to immediately write-off depreciable assets costing less than $20,000, is now accessible to 90,000 more businesses.
Until recently, this instant write-off was only accessible to businesses with an aggregated turnover of less that $2 million. But, a last minute deal struck between the government and Senator Nick Xenophon to pass the enterprise tax Bill – containing amongst other things the tax cuts for business and a change in the small business threshold – extends this concession. The Bill passed Parliament on 9 May 2017.
For businesses that have not previously accessed this concession, it’s important to understand how you can take advantage of it this financial year to maximise your deductions.
With the passing of the bill, businesses with revenue of up to $10 million have been brought into the fold. At the time the write off was implemented in June 2015, small businesses were counted by the ATO as those that had an aggregated turnover of $2 million or less.
Now a much larger number of businesses will be able to make a claim under the scheme for the first time. Small businesses should not miss out on this chance, if their circumstances allow.
It is important to remember that you can’t claim a tax write-off if you aren’t paying any tax, and you are only paying tax if you are making a profit. The tax you are expecting to pay on your profit also needs to be big enough to cover the expected deduction on your purchase.
Additionally, cash flow is king, and businesses need to be able to afford to take on the cost of the purchase until a portion of it can be claimed back – even when the claim is made, it will only be for a percentage of the cost of the asset.
There are a wide range of assets that can be claimed under the instant write-off, including cars, IT equipment, office equipment (including coffee machines and art), and more.
According to Treasury data, in the first six months of the scheme to December 2015, 99,000 small businesses made claims worth $418.5 million. Over the course of two years, it has helped many hundreds of thousands of businesses make a purchase that has helped to grow their business.
Originally, the $20,000 deduction limit was to reduce back to $1,000 on 30 June 2017. However, Treasurer Scott Morrison announced on Budget night that the $20,000 limit would continue until 30 June 2018.
Don’t leave it to chance. To find out how to take advantage of the $20,000 instant asset write off, contact MWM Advisory now.