Can you claim the small business tax break recently announced by the government to invest in new technology?
It was one of the headline announcements from the budget delivered by Joe Hockey.
So what is it exactly, how does it work and can you benefit from it?
What is it the small business tax break?
The $20,000 small business tax break allows you to instantly write off any asset purchased up to the $20,000 threshold. There is no limit on the number of items a small business can claim. This concession applies between 7:30pm May 12, 2015 and June 30, 2017. Previously the instant asset write off was capped at $1,000 per asset purchased. This meant a small business would have to spread tax deductions from any asset purchases over a number of years.
Who is eligible?
The $20,000 small business tax break applies to registered small businesses and sole traders. To be defined as a small business or sole trader you need to have a turnover of less than $2 million per annum. You will also need to prove that your carrying out a legitimate business. The easiest way to do this is via your quarterly Business Activity Statements or an ABN. The business must be actively trading to be eligible for the break.
What’s covered?
Small business can purchase any asset involved in running their business.
Items could be a computer, IT hardware, desks, tools and even cars.
“Cars and vans, kitchens or machinery … anything under $20,000 is immediately 100 per cent tax deductible from tonight.” – said Australian Treasurer Joe Hockey during his budget night speech on May 12, 2015.
Basically, any asset involved in running a business is covered by the scheme.
What’s not covered?
There are a few restrictions on $20,000 instant asset write off to keep in mind:
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Some horticultural plants and any software developed in-house by a business is not deductible (however software purchased for the business, for example Microsoft Office, Windows, Photoshop,etc – can be claimed).
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Assets must be physical items. Marketing costs for example are not an eligible deduction.
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For a small business to claim the tax deduction it must own the asset by purchasing it outright. So the item cannot be claimed under hire-purchase or leased. This is because the finance company owns the asset until it is paid off. You can however claim the deduction if the asset has been purchased under financing arrangements.
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If the item is over $20,000 it is not eligible as an instant tax write-off. Any assets purchased over $20,000 can be added together and depreciated at the same rate of 15% in the first year and 30% per year thereafter.
What else do you receive?
In addition to the instant asset write-off, small businesses will have their tax rate lowered, from 30 per cent to 28.5 per cent.
What does this mean for you?
The financial year has not yet finished, meaning if you want or need any new hardware, software or any other equipment for your business – now is the time!
On average, If a small business owner claims the maximum instant tax deduction of $20,000 before EOFY, they will be able to receive about $6000 within months, rather than waiting until the end of the year. This money can be reinvested in new staff, marketing and sales or equipment.
Dengineer PC can help supply you with the right equipment and software for your business as well as set it up and maintain it.
We also design and develop websites, and according to the Australian Taxation Office – Website Expenditure can be claimed as an outright deduction