In a move that was sure to please many voters, on 9 May 2017 the Government announced an extension to its prior year Budget measure providing an instant asset write-off provision for small business.
Due to cease 30 June this year, the measure has been extended to 30 June 2018.
Under the provision eligible small businesses can immediately deduct (as opposed to depreciating over a number of years) the business portion of most assets if they cost less than $20,000 and were purchased after 7:30PM on 12 May 2015.
This deduction can be used for each asset that costs less than $20,000, whether new or second-hand. The deduction is claimed through your tax return in the year the asset is first used or installed ready for use.
This provision is available to small businesses with an aggregated turnover (the total normal income of your business and that of any associated businesses) of less than:
- $10 million from 1 July 2016 onwards
- $2 million for previous income years.
The measure is available whether you operate your business as a sole trader, partnership, company or trust.
Some other points of note are;
- If you are registered for GST you exclude the GST amount you paid on the asset when you calculate your cost. For example an excavator costing $19,000 + $1,900 GST would still be eligible even though the total purchase price is $20,900. This is because a GST-registered entity would claim back the $1,900 GST on its Business Activity Statement leaving a true cost of $19,000;
- If you are not registered for GST you include the GST amount you paid on the asset in your cost calculations. In the example above the true cost of the excavator would be $20,900 which is above the $20,000 threshold meaning it wouldn’t be eligible for immediate write-off;
- The cost of an asset includes the amount you paid for it and any additional amounts you spent on transporting and installing it ready for use;
- The immediate-write off may still be available even if the asset is purchased under finance; and
- Some assets are specifically excluded from these provisions.
If you are unsure of the process with your asset deductions we can assist you. Please get in touch with BLG Business Advisers online or by calling (02) 4229 2211.