Treasurer rewards the ‘engine room’ of the economy
Sales of office equipment and higher-priced technology items are among many business purchases that are expected to spike over coming months as a result of the federal government’s decision to increase the instant asset write-off threshold from $25,000 to $30,000 until 30 June 2020.
It is the second increase this year as the write-off was increased from $20,000 to $25,000 in January.
Businesses will be able to use the up-front deduction on all asset purchases up to this value.
In addition, eligibility requirements would be changed to businesses with annual turnover of up to $50 million. The change will enable an additional 220,000 businesses to access the write-off, taking the total number of businesses eligible to claim the up-front deduction to 3.4 million.
Australia’s small businesses were singled out by Treasurer Josh Frydenberg in the April 2nd budget speech as being the “engine room” of the economy.
In addition to the increase in the asset write-off, the Treasurer also announced a cut in small business tax from 27.5 per cent to 25 per cent. That will apply to all companies with an annual turnover of less than $50 million. Companies currently facing a 27.5 per cent rate will see the reduction to a 25 per cent rate by 2021-22 — a move that’s five years earlier than planned. The standard company tax rate is 30 per cent.
Great news for small (and not so small) businesses!
End of financial year is only two months away so don't forget to take advantage.
This means you can continue to claim the cost of new or second-hand assets that are less than the threshold of $30,000. What does it mean for your business?
If your business has a turnover of less than $50 million, you can instantly claim the business portion of most depreciating assets that cost less than $30,000 each. You can claim the deduction through your tax return, in the year the asset was first bought and used or installed ready for use.
Assets of $30,000 or more can be put into a small business asset pool where you can claim a proportion of the amount as a deduction each year.
Example: Immediate write-off
On 18 May 2018 Fiona buys a new powerful computer for $6,800 that she uses 80% of the time for business purposes and 20% of the time for personal purposes. She also bought a new printer for $700 which she uses for 100% of the time for business purposes.
For the computer, Fiona calculates her instant asset write-off as 80% (the business use proportion) of $6,800, so she claims $5,440.
For the printer, she claims the entire cost of $700.
Fiona includes the combined amount of $6,140 at label A of the Business and professional items schedule which is filled out when completing her tax return.