In the Budget on Tuesday, the Government announced that
it would increase the instant asset write-off threshold to $30,000 and extend
it to medium sized businesses (those with an aggregated annual turnover of less
than $50 million).
This, and the earlier change announced in January (to
extend the write-off threshold to $25,000) passed both Houses of Parliament
yesterday and is now law (subject to the formality of Royal Assent).
The amendments mean there will be three tiers in the
2018/2019 financial year:
threshold for depreciable assets that are acquired and installed ready for use
before 29 January 2019. Only available for businesses with an aggregated
turnover less than $10 million.
2. $25,000 threshold for assets first used or
installed between 29 January 2019 and 2 April 2019. Only available for
businesses with an aggregated turnover less than $10 million.
threshold for assets first used and installed after the 2 April budget
announcement and before 1 July 2020. Available for businesses with a turnover
of less than $50 million.
Going forward, all businesses with a turnover under $50
million are now eligible for a write-off of $30,000. This will be available
under 30 June 2020.
To get the taxation benefit of this in the current financial year, you will need to have the asset installed ready for use on or before 30 June 2019.
On 31 March, the Government secured Senate support for the passage through Parliament of legislation to assist small to medium businesses. While company tax cuts were the headline measure, included in the changes was an increase to the Small Business Entity (SBE) turnover threshold. Backdated to 1 July 2016, the SBE turnover threshold has been increased from $2 million to $10 million. Treasury estimates that this will allow an additional 90 000 to 100 000 businesses to qualify for a range of SBE tax concessions including:
Immediate deductibility for small business start-up expenses
Simpler depreciation rules
Simplified trading stock rules
Roll-over relief for restructures of small businesses
Deductions for certain prepaid business expenses immediately
Accounting for GST on a cash basis
Annual apportionment of input tax credits for acquisitions and importations that are partly creditable
Paying GST by quarterly instalments worked out by the ATO
Fringe benefits tax (FBT) car‑parking exemption and
Pay‑As‑You‑Go (PAYG) instalments based on gross domestic product (GDP)‑adjusted notional tax.
With the legislation and therefore increased SBE eligibilty backdated to 1 July 2016, this presents a tax planning opportunity for business. Among the depreciation concessions is the $20 000 instant asset write-off – giving SBEs the ability to claim as a deduction the full cost of the asset in the year of purchase and installation (rather than having the item depreciated over a number of years). The real benefit of the write-off is an improvement to your cash-flow – bringing forward deductions rather than having them spread out over more than one year. To claim a deduction in 2016/2017, the asset must have been acquired on or after 1 July 2016 and first used or installed ready for use in your business on or before 30 June 2017. So if you are contemplating purchasing a depreciating asset for your business (such as furniture, machinery, tools, equipment, small motor vehicle etc.) you may wish to bring forward that purchase to before 1 July 2017 and enjoy the cash-flow benefit.
Over the coming months we will be detailing the other various concessions listed above.