Extending the $20,000 asset tax write-off scheme once again is another win for small business. The federal government’s recent 2018 budget continues the favorable environment for over 3 million SMEs.
Forty percent of small business fail due to a lack of capital, this 2018 budget measure will improve cash flow, providing an additional boost to small business activity for another 12 months by encouraging investment by replacing or upgrading facilities and assets.
By improving your cash flow, the small business will have more flexibility to hire more employees and sell more. Businesses with an annual turnover of up $10 million will now have until June 30, 2018, to immediately deduct eligible assets up to the value of $20,000.
The $20,000 asset tax write-off covers
If you are running a small cafe, you might need new kitchen equipment, or new tables and chairs, If you’re a tradie, you might need new tools, another truck or machinery to take on more work. Vehicles, factory or computer equipment under $20,000, In other words, any asset involved in running a business is covered by this scheme.
Changes to $20,000 asset tax write-off
Before the Budget 2015 announcement, SMEs would immediately deduct business assets costing less than $1,000. On Budget night, the Treasurer stated that the threshold for the immediate deduction will increase to $20,000 on 12 May 2015 for small businesses with an aggregated turnover less than $2 million; this threshold will increase to $10 million from July 2017.
This $20,000 asset tax write-off is very popular among the small business community. In a pre-budget poll of SmartCompany readers, 60% said they were hoping the government would make the scheme permanent. Meanwhile, Peter Strong, chief executive of the Council of Small Business of Australia, told SmartCompany his members say “time and time again” how well-used the scheme is. It seems that the $20,000 asset tax write-off is here to stay.
$20,000 asset tax write-off eligibility
Any business that meets the definition of a small business entity, that is one with an accumulated turnover less than $10 million, might be eligible to claim an immediate deduction for the cost of depreciating assets acquired for less than $20,000.
What if write-off is over $20,000?
Assets over $20,000 can be fully written off, but not immediately, you can group your assets that go beyond the threshold in order to depreciate them at the same rate (15% in the first year, 30% for every year after that). The package is designed to stimulate the economy by helping businesses to grow while at the same time handing over some of their cash to other businesses, also it increases the profit and with higher profit there will be high investment, and investment is extremely effective in creating employment growth.
What is not covered by the scheme?
Assets over $20,000 are not eligible for the instant tax write-off, however they can be fully written off over a longer period of time. The following assets however are excluded:
- Buildings or extensions
- Structural improvements in-house software horticultural plants
- Including grapevine assets that are leased out
- Second hand goods are deductible, it does not matter if the asset you are buying for your business is new or second hand, you still can claim the deduction on.
- For business use not personal. This is very common that people use business asset for personal use, the tax deduction can only be claimed on the business percentage not personal percentage.
- For example; if you purchased a car and use it 80% for business and 20% for personal use, only that 80% can be claimed.
- Assets should be ready to use – If you use the $20,000 immediate deduction, as a business owner you should start using the asset in the financial year that you purchased it or have it installed ready for use.
- Is the purchase relevant, you need to make sure that there is a relationship between the assets purchased by the business, business must generate income with that purchase, for example; five big TV screen televisions are unlikely to be deductible for a carpentry business.
How to apply the $20,000 asset tax write-off
- write off eligible assets costing less than $20,000 each
- pool most other depreciating assets that cost $20,000 or more
- write off the small business pool balance if it is less than $20,000 at the end of an income year
- only claim a deduction for the portion of the asset used for business or other taxable uses.
- the $20,000 asset tax write-off threshold now applies until 30 June 2019.
Unsecured business loans designed with speed and simplicity. Ease of repayments through daily, weekly or even monthly programs and automatically deducted from your bank account. There is no need to write a check, no transfers and no surprises, it is short-term business finance without any stress for SME’s.
Overall big and small business has largely backed the Treasurer’s 2018 budget. To all entrepreneurs, be smart and take advantage of this extension for your $20,000 asset tax write-off for 2018 / 2019. Do you need tools and equipment, but short on cash, Accrutus Capital can help new business owners with less than 2 years trading history, no financials and no security. Offering short-term business finance solutions where your credit may not be perfect.