Are you utilising your small business tax concessions effectively?
What is the small business concession we’re talking about?
If your business has an aggregated annual turnover (that being the total normal income of your business and that of any associated businesses) of less than $2 million than you are eligible to take advantage of this concession. If this is an area you wish to discuss then contact us at Total Accounting Partners on (07) 3284 7752 to meet with one of our accountants.
- immediately write-off – deduct their full cost in the year you buy them – most depreciating assets that cost less than $20,000* each that were bought and used, or installed ready for use from 7.30pm (AEST) on 12 May 2015 until 30 June 2017
- pool most other depreciating assets that cost $20,000 or more in a small business asset pool and claim
- a 15% deduction in the first year (regardless of when you purchased or acquired them during the year)
- a 30% deduction each year after the first year
- write-off the balance of your small business pool at the end of an income year if the balance – before applying any other depreciation deduction – is less than $20,000**.
* The current instant asset write-off threshold is $20,000. It has changed over the last few years.
Source: Australian Tax Office
* Please note: From 1 July 2017 the small business pool threshold will change to $1,000. Once this occurs this will be the amount that you are able to depreciate. We advise speaking with one of our accountants prior to next financial year to ensure you have the ability to take advantage of this as part of your business’s tax return if relevant.
**If you later sell or dispose of an asset for which you claimed an instant asset write-off, you include the taxable purpose proportion of the amount you received for the asset in your assessable income.
Example: Exceeding the threshold
Daryl owns an electrical business, Daryl’s Electrical, qualifies as a small business. The business purchases a ute for $40,000 on 28 July 2015. Daryl estimates the ute will be used 40% of the time for his business.
Even though the value of the ute to the business is $16,000 ($40,000 x 40%), Daryl can’t immediately write it off. Instead he adds the $16,000 for the ute to Daryl’s Electrical small business pool.
Example: Immediate write-off
On 18 May 2015 Fiona buys a new powerful computer for $6800 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 ($5,440). For the printer, she claims the entire cost ($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 income tax return.
Total Accounting Partners are available to assist with all your enquiries. Please feel free to contact us at any time to discuss your situation and financial needs.