Tag: SBE

INSTANT ASSET WRITE-OFF EXTENDED

Posted on November 23, 2018 by - Featured Articles, Small Business

The extension of the $20,000 instant asset Write-Off has now been passsed into law. 

PASSED
In the May 2018 Federal Budget the Government announced an extension to the Small Business Instant Asset Write-Off that was originally introduced from 1 July 2015. Under the Budget announcement, the Write -Off was to be extended until 30 June 2019 (it was to expire 30 June 2018). On 12 September 2018, The Treasury Laws Amendment (Accelerated Depreciation for Small Business Entities) Bill 2018 was passed by the Parliament into law to give effect to this 12-month extension.


More info? In our exclusive Members Area, watch the Webinar on Instant Asset Write-off (under the useful links tab) and read the full article in your November/December 2018 Bi-Monthly Newsletter, page 15.

NOT a member? Join today for exclusive access to articles, webinars, videos & publications on Saving Tax!
Call today on 1800savetax (1800 728 3829) for a special offer for first time subscribers.
https://mytaxsavers.com.au/what-do-i-get/

GST SBE Concessions

Posted on March 15, 2018 by - GST

SMALL BUSINESS ENTITIES

Small Business Entities have access to a range of GST concessions including accounting on a cash basis, paying GST by instalments, an annual apportionment of GST credits, and a new Simplified BAS. Are you taking advantage of these concessions?

SBE Defination Extended!
New law has now been passed by Parliament expanding the definition of Small Business Entity (SBE).

Backdated to 1 July 2016, to qualify as an SBE you must be carrying on a business and have an annual turnover of less than $10 million – including the turnover of any connected entities or affiliates. This is up from the previous turnover threshold of $2 million. Treasury estimates that this change will open the way for an additional 90,000 to 100,000 businesses (i.e. those with a turnover of between $2 million and $10 million) to access the following GST SBE concessions:

New Law – Simper BAS
SBEs  may now be eligible to complete a simplified Business Activity Sttement (BAS) under the new Simpler BAS rules.

At its core Simpler BAS involves the reduction in the number of labels on the BAS. Under Simpler BAS SBEs now only need to report the following GST information on their BAS:
  • GST on sales (label 1A)
  • GST on purchases (1B)
  • Total sales (G).
SBEs are no longer required to report Export saels (G2), other GST-free sales (G3), Capital purchases (G10), and Non-capital purchases (G11). These labels are removed from the BAS altogether. Simpler BAS is aimed at simplifying BAS preparation, but also account set-up within a software file, and GST bookkeeping. To this end, the ATO has worked closely with software companies to streamline the coding of transaction for users of Simpler BAS. Within the software under Simpler BAS, you will only have three tax codes to choose from which wil generally be: GST, GST-free or Out of Scope. This may assist by making it easier to classify transactions with the other tax codes not relevant (e.g. Capital Purchases etc.).

ACTION POINT
  • SBEs do not need to opt-in to Simpler BAS – it is compulsory. The ATO will automatically send out these streamlined BAS to eligible SBEs. If you are an eligible SBE and you do not receive the simplified BAS, you should contact the ATO.

CAUTION
In theory, with the reduction in labels, Simpler BAS will make GST reporting and bookkeeping requirements simpler. This may encourage SBEs to bring the BAS function in-house rather than pay a Bookkeeper or Accountant to prepare your BAS. However, a word of caution! Although for GST purposes there will only be 3 classification, complexities will still arise in determining which supplies and purchase attract GST and which do not. A reduction in reporting labels does not change the complex GST law that sits behind thoise labels. Therefore, while moving the BAS function in-house may be appealing in terms of cost, you may wish to leave BAS preparation in the hands of your Bookkeeper or Accountant and enjoy the peace of mind and time savings that this brings.

Accounting on a Cash Basis
SBEs can elect to account on a cash basis. This means they can:
  • Claim GST credits on business purchases in the tax period in which you pay for those purchases. If you pay only part of the cost of a business purchase in a tax period and have a valid tax invoice, you will only claim GST credits for that part of the cost you payed for in that tax period.
  • Account for the GST payable on your sales in the tax period in which you receive payment. If you only receive part payment for a sale in the tax period, you will account only for the part of the GST payment that relates to that part of the sale in that tax period.

To continue to read this article in full & other similar articles, please log in to your members area – Special Editions – GST //mytaxsavers.com.au/app/uploads/2017/07/2017-Specials-GST.pdf
Not a member? Join now! //mytaxsavers.com.au/plans/subscriptions/

Tax Relief on Changing Business Structures

Posted on October 18, 2017 by - Income Tax & FBT

Whilst the ability for a small business to change their legal structure without attracting a tax liability has been available for a little over 15 months, it may be one of those areas that small business and tax practitioners are still coming to terms with. This tax tip considers:
The eligibility criteria;

  • How the provisions work; and
  • What are the impacts. 

Is My Business Eligible 

To be eligible and to gain access to the rollover provisions, a number of tests must be satisfied as follows: 

  1. Both the transferor and the transferee must be small businesses 

This means that both the transferor and the transferee must be businesses each with an aggregated turnover of less than $10 Million.  Note that this aggregated turnover not only relates to the subject entity, but also to entities that may be affiliated or connected with the subject entity. Care is required in determining the applicability of this test as the affiliated or connected with test can be quite complex. 

  1. The restructure must be part of a genuine restructure and not part of a tax driven scheme 

Whether or not a restructure is “genuine” will depend on the specific circumstances surrounding the restructure. The guidelines that accompanied the restructure legislation provide some details on what may be considered a “genuine restructure” and include:

  • A bona fide commercial arrangement has been undertaken to enhance business efficiency;
  • The business continues to operate following the transfer, through a different entity structure;
  • Transferred assets continue to be used in the new business structure;
  • The new structure that has been adopted has taken professional advice when setting up the business;
  • The restructure is not artificial or unduly tax driven; and
  • The restructure is not a divestment of assets or a preliminary step to facilitate the disposal of assets outside the business. 
  1. Ultimate economic ownership must be maintained before and after the restructure 

The ultimate economic owners of an asset are the individuals who, directly or indirectly, own an asset. Where there is more than one individual with ultimate economic ownership, there is an additional requirement that each individual’s share of ultimate economic ownership be maintained. Where a discretionary trust is involved, this means that there is no practical change to the individual beneficiaries who ultimately benefit from the assets before and after the transfer. 

How The Provisions Work 

A business can be operating either as a sole trader, a partnership, a company or as a trust. There may be a time when the business owners believe that they have “outgrown” their current trading structure and that the structure no longer meets their needs. This could involve asset protection issues, commercial requirements, public perception, etc.  The Rollover Provisions provide opportunities for a business to restructure from one legal entity to another without incurring a range of tax liabilities that would normally arise when such a transaction is performed. 
It is important to note however that the rollover provisions only apply to certain “active assets” of a business. Such assets are normally CGT assets, depreciating assets, trading stock and other assets that form part of the operating business being restructured.  The rollover does not apply to certain assets such as shareholder or beneficiary loans or  passive assets held in a structure. 

What Are The Impacts 

There are a number of impacts that you should consider before applying the restructure rollover measures including:

  • Assets are taken to be transferred at their tax cost and as such will not result in an income tax liability to either the transferor or the transferee.
  • There is no requirement for any consideration (market value or otherwise) to be provided by the transferee in exchange for those assets.
  • In relation to specific asset classes, the following should be considered:
  • Pre-CGT assets retain their pre-CGT status.
  • Post-CGT assets are taken to be acquired by the transferee at the date of transfer for their cost at that time. This means that to be eligible to claim the CGT discount on any subsequent sale from the new structure, you will need to wait at least 12 months.
  • Access to the 15 year exemption however as part of  the small business CGT concessions is not affected as the transferee will be taken to have acquired the asset when the transferor acquired it (different to the CGT discount).
  • Trading stock can either be transferred at the transferor’s cost or at the market value of that stock held by the transferor at the start of an income year.
  • Revenue assets take the cost which will result in no profit or loss to the transferee.
  • Depreciating assets will be transferred at the written down value of those assets at the date of the transfer and then continue to depreciated using the same method and effective life that the transferor was using. 
  • There may also be issues to consider in relation to GST or stamp duty on the restructure so professional advice should be sought when utilising the rollover measures. 
  • The restructure provisions can have a very positive outcome for small businesses looking to restructure their affairs, but ensure you seek appropriate professional advice as there may also be some other implications that result in unwanted outcomes..

SBE Opportunities

Posted on October 5, 2017 by - Capital Gains


CGT

Small Business Restructure Rollover

The increased SBE threshold of $10 million also applies to the rollover for restructures of SBEs. To recap, this measure allows SBEs to change their operating structure without incurring capital gains tax or other income tax liabilities. It does this by providing an optional rollover (deferring any CGT liability or income tax liability until the asset is eventually sold) where an SBE transfers an active asset of the business to another SBE as part of a genuine business restructure, without change the ultimate economic ownership of the asset. The rollover may also be available for assets that are used by the SBE but held by an entity connected or affiliated with the SBE or, if the SBE is a partnership, a partner of that partnership. This ensures that partners and other ‘passive entities’ within an SBE that are not themselves SBEs (because they do not carry on a business themselves) can access the new rollover. Under the rollover, specifically, from a CGT standpoint:

  • No capital gain or loss will accrue to the Transferor. The Transferee will be treated as acquiring the asset on the date of transfer for an amount equal to the cost base of the asset.
  • Pre-CGT assets will retain their pre-CGT status post-transfer.
  • For the purposes of the 50% CGT discount, the ’12-month clock’ will be reset, such that the Transferee will need to hold the asset for a further 12 months following the restructure to avail themselves of this discount.
  • For the 15-Year Exemption however, the Transferee will be taken to have acquired the asset back when it was originally acquired by the Transferor.


As the $10 million increased threshold is backdated to1 July 2016, tax returns may need to be amended in respect of capital gains made and declared from restructures after this date. Amendments may result in refunds where any capital gains liabilities have been paid. 

CGT Small Business Concessions – No change


Unfortunately, the increased $10 million SBE threshold does not apply to the CGT Small Business Concessions (i.e. the Active Asset Reduction, Retirement Concession, Rollover, 15-Year Exemption). To access these concessions, the standard criteria must be met, namely you and connected entities must be met, namely you and connected entities must have net assets to the value of less than $6 million or your annual turnover (including connected entities and affiliates) must be less than $2 million.



For more articles on Small Business Oportunities log into your members area //mytaxsavers.com.au/2017-july-august-page-20/
Not a member? Subscribe today //mytaxsavers.com.au/plans/subscriptions/

NON-COPRPORTATE TAX CUTS – SBITO

Posted on October 5, 2017 by - Blog, Business Tax

The Government has passed legislation increasing the rate of the Small Business Income Tax Offset (SBITO). This article details this change and its tax impact.

INCREASED OFFSET
Along with companies, the more than 70% of small businesses that are not incorportated will also enjoy additional income tax relief from 2016/2017. In 2016/2017 income and later income years, a higher rate of SBITO will apply:

  • For 2016/2017 to 2023/2024, the SBITO is 8% of an eligible individual’s basic income tax liability that relates to their total net small business income (up from 5% in 2015/2016).
  • For 2024/2025, the SBITO is 10% of an eligible individual’s basic income tax liability that relates to their total net small business income.
  • For 2025/2026, the SBITO is 13% of an eligible individual’s basic income tax liability that relates to their total net small business income.
  • For 2026/2027 and later income years, the SBITO is 16% of an eligible individual’s basic income tax liability that relates to their total net small business income.
Furthermore, the aggregated turnover test for access to the SBITO has been increased from 2016/2017 to $5 million (up from $2 million).

BACKGROUND
By way of background, individuals are entitled to the SBITO if they are an SBE (i.e. sole trader) or they have a share of a smaill business’ net income included in their assessable income (for example, distrbutions from a partnership or trust which themselves are SBEs) provided the small business is not a corporate tax entity (i.e. company). An individual can only claim one SBITO for an income year irrespective of the number of sources of small business income that an individual receives. The maximum amount of the SBITO from all sources of SBE income is $1,000 for an income year which will be claimed in your year-end tax return. 

Although capped at $1,000 per individual, serveral individuals within the one structure can enjoy their own SBITO (not just the business owner) provided at the end of income year they are assessed on income from an SBE. The discount is applied to your net small business income’ as follows:

To contine reading this article in full, log into the members area and see the July/Aug 2017 Newsletter update:- https://www.mytaxsavers.com.au/2017-page_jul-page_aug-page_17/       
Not a member? Easy join today https://www.mytaxsavers.com.au/product-category/memberships/

$20,000 instant asset write off

Posted on July 7, 2017 by - Tax Questions, Uncategorized

This is the final year of the $20,000 instant asset write-off – to be abolished from 1 July 2018. 

Until 30 June 2018, Small Business Entities (SBE’s) can claim an immediate write-off for most depreciating assets used in their business if the asset costs less than $20,000 and the below time frames are met. In broad terms, SBE’s are entities (including sole traders) that are carrying on a business and have an annual turnover of under $2 million. This includes the turnover of any connected entities and affiliates. 

Being in its final year of operation, the timing requirements around the instant asset write-off are important.

To claim a deduction in 2017/2018, the asset must have been acquired on or after 1 July 2017 and first used or installed ready for use in your business on or before 30 June 2018.  To be claimable in full in 2017/2018.  

If you miss the deadline (i.e. if the asset is not being used in your business or installed ready for use on or before 30 June 2018) then the write-off threshold reverts to $1,000. 

Missing the deadline will result in a worse cash-flow outcome for your business than if the deadline is met . 

WHAT’S THE BENEFIT?

The real benefit from the $20,000 write-off is an improvement to your cash-flow. The write-off improves small business cash-flow by bringing forward deductions rather than having them spread out over more than one year. Cash-flow can be a significant issue for small business, particularly start-ups. That said, it is important to have perspective. You are only getting back the tax rate on the asset, not the full value of the asset. This is the same as the old law where the write-off was $1,000 (which will apply from 1 July 2018).  You don’t get any extra cash than you would otherwise have received under the old rules – you simply get it sooner.

Consequently, you should not let tax distort or blur your commercial instincts – as you don’t get any extra cash than you would otherwise have under the old rules, you should continue to only buy assets that fit within your business plan .

Immediate Deduction for SBE Start-up Expenses

Posted on July 7, 2017 by - Small Business

IMMEDIATE DEDUCTION FOR SBE START-UP EXPENSES

This allows taxpayers who are not in business or are a Small Business Entity (SBE) (turnover of less that $10 million) to immediately deduct certain expenses relating to the proposed structure or operation of a business. The expenses must relate to a business that is proposed to be carried on, including certain Government fees and charges and costs associated with raising capital, where these expenses would otherwise be deductible over five years. Eligible expenses generally fall into two categories:

  • Expenditure on advice or services relating to the structure or operation of the proposed business.
  • Payments to Australian Government agencies.

Allowing SBE’s to deduct their start-up expenditure in the year it is incurred provides them with a cash-flow benefit. The deductions are brought forward rather than spread out over a number of years. Cash-flow is one of the main killers of start-up businesses.

TAX TIP
Given that the threshold increase is backdated to 1 July 2016, if your business incurred these expenses but failed to claim them in full in the 2016/2017 tax return, you may wish to amend that return.

Subscribers – for the full article on all SBE Opportunities please log-in to your Members Area, July/August Newsletter, page 17.
Not a Subscriber? Call us on 0755264933 and we can set you up!

SMALL BUSINESS REDIFINED

Posted on April 6, 2017 by - Business Tax

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.

 

THE 123 OF SBEs

Posted on September 29, 2016 by - Featured Articles

WHAT IS AN SBE?

SBEs can include companies, partnerships, trusts or sole traders. To qualify as an SBE the following two criteria must be met:

1. CARRYING ON A BUSINESS
To be an SBE you must in the first place be carrying on a business. The long-standing ATO tax ruling in this area is Taxation Ruling Tr 97/11 which contains the following series of factors that may indicate that a business is indeed being carried on:
  • There is a significant commercial purpose or character
  • There is more than a mere intention to engage in business
  • There is a repetition and regularity to your activities – and some genuine time spent on the activity
  • The business is carried on in a similar way to others within the same industry
  • There is organisation to your activity
  • There is size and scale to the activity
  • It is not a hobby or a form of recreation

Leaving aside the tax concessions on offer, carrying on a business (as distinct from a hobby) brings with it a range of tax obligations. If you are in any doubt as to whether your are indeed carrying on a business you should consult your Accountant.

2. TURNOVER <$2 MILLION
If you are carrying on a business, you will be an SBE if your aggregated annual business turnover (i.e. gross profit) is less than $2 million. This includes the turnover of:
  • Connected entities – an entity is connected with another entity if: either entity controls the other, OR Both entities are controlled by the same third entity.
  • Affiliates – an affiliate is any individual or company that, in relation to business affairs, acts or could reasonably be expected to act: According to your directions or wishes, OR In concert with you.
The aggregation rules ensnare quite a number of related businesses – requiring them to add their annual turnover together and as a result potentially take them over the $2 million threshold. If you are in any doubt as to the application of these rules, talk to your Accountant.

THRESHOLD
The $2 million turnover threshold is absolute. If it is exceeded by even $1, your business will be ineligible for many SBE concessions on offer (some detailed later). If your business’s turnover is around $2 million, it’s worth keeping a close eye on it at financial year-end. While we do not suggest that, you avoid growing your business just to stay under the threshold, if your turnover is nearing the threshold at financial year-end, it certainly pays to stay under that threshold from a tax perspective –  perhaps by deferring year-end invoicing where practical to the following financial year (post 30 June).

We now examine some of the SBE concessions available – 


IMMEDIATE DEDUCTIONS FOR PREPAID EXPENSES

As an SBE you can claim an immediate deduction for certain prepaid business expenses where either of the following 2 conditions is met:
1.  The payment is for a period that is 12 months or less and ends on or before the last day of the income year in which the expense is incurred, or
2.  The prepaid expense is “excluded expenditure” which is defined as expenditure that is:

  • Less than $1,000 (GST-exclusive) or 
  • Prepayments that are required to be made under a law or by court order under the Commonwealth, State, or Territory (e.g. car registration, workers compensation, etc) or 
  • Made under a contract of service (e.g. salary and wages).

EXAMPLE
In May 2016, Bruce’s business prepays $2,000 for an advertisement to be run in the local newspaper every fortnight for six months from May until November.

NON SBE
If Bruce’s business was not an SBE (i.e. had a turnover of $2 million or more) and the prepayment was for $1,000 or more, the deductions must be apportioned over the periods to which they relate.  Therefore only two months’ worth of deductions (for May and June) could be claimed in 2015/2016.  The remainder must be claimed in 2016/2017 being the period to which they relate.

SBE
If Bruce’s business is an SBE, then because the period for which the payment relates is for 12 months or less and ends before the conclusion of the following income year (2016/2017), Bruce can claim the entire $2,000 prepayment as a tax deduction in the 2015/2016 tax return.  This is irrespective of the fact that the amount exceeds $1,000.  This outcome reduces Bruce’s taxable income for the year, resulting in less tax and a consequent cash-flow benefit.

Assume instead that the above $2,000 amount was for vehicle registration for a vehicle used exclusively in the business.  Although the amount is for more than $1,000 and covers more than one income year, there is no requirement to apportion the payment.  It can all be claimed in 2015/2016 as it is required to be paid under State Government law.

The prepaid expenditure concession provides SBEs with cash-flow relief by enabling them to bring forward deductions that would otherwise be apportioned over two income years.  Examples of business expenditure items that you may wish to prepay include rent, insurance, repairs to business assets, subscriptions, business trips, seminars and conference bookings, leases, deductible car registration fees, and telephone and internet services.

TRADING STOCK RELIEF

Conducting a stock-take usually involves physically counting your stock and valuing each item.  This can be a time-consuming process.  Rather than conduct an end-of-year stock-take in order to account for changes in the value of your trading stock, as an SBE you can elect not to conduct a stock-take where there is a difference of $5,000 or less between:

  • The value of your stock on hand at the start of the income year and
  • A reasonable estimate of the value of your stock on hand at the end of the income year.

TAX TIP
An increase in your trading stock’s value over the year is assessable income, while a decrease is an allowable deduction.  It follows that where there has been a decrease, you may wish to ignore this SBE option of not conducting a year-end stocktake (to not conduct a stocktake in such circumstances would be to deny your business a year-end deduction).

INSTANT ASSET WRITE-OFF

2016/2017 is the final year for SBEs to take advantage of the $20,000 instant asset write-off and provide your business with cash-flow relief.  Until 30 June 2017, SBEs can claim an immediate write-off for most depreciating assets used in their business if the asset cost less than $20,000.

TIME REQUIREMENTS
Being in its final year of operation the timing requirements around the instant asset write-off are important.

To claim a deduction in 2016/2017, the asset must be first acquired from 1 July 2016 and first used or installed ready for use in your business on or before 30 June 2017.

Assets acquired before 1 July 2016, but first used or installed ready for use between 1 July 2016 and 30 June 2017 are also claimable in full in 2016/2017.

If you miss the deadline (i.e. if the asset is not being used in your business or installed ready for use on or before 30 June 2017) then the write-off threshold reverts to $1,000.  Missing the deadline will result in a worse cash-flow outcome for your business than if the deadline is met (see later example).

Assets costing $20,000 or over are depreciable at a rate of 15% in the first year, and then 30% in subsequent years.

CASE STUDY: CASH-FLOW BENEFIT
An eligible SBE company purchases an eligible asset for $19,999 on 2 July 2017.  As the asset is not purchased and installed ready for use on or before 30 June 2017 the instant write-off threshold is only $1,000.  As this asset exceeds this threshold the standard pooling rules apply.  The asset will be written off at 15% in the first year of 2017/2018 ($3,000) and 30% in subsequent years.  The real benefit (i.e. the effect of the tax deduction in dollar terms) the company would receive from these depreciation claims is $855 for the first year (assuming a 28.5% small company tax rate) and $1,453 in the second year (assuming a small business company tax rate of 28.5%).  The company would continue to depreciate its general pool at 30% until the pool was under $1,000, at which point the entire pool could be written-off (after approximately 9 years).
By contract, if the purchase of the asset was brought forward a few days and the asset was used or installed ready for use on or before 30 June 2017 under the $20,000 threshold, the company would be able to immediately deduct the entire $19,999 in the first income year (2016/2017).  The real benefit (i.e. the effect of the tax deduction in dollar terms) the company would receive from this is $5,699 in the first year ($4,844 more than under the old rules – i.e. the benefit is brought forward rather than spread out and therefore assists the company’s cash-flow). 
The company is then free to apply this brought-forward cash immediately (e.g. pay off debt or re-invest in the business etc).  In the second income year, there is no further depreciation of this asset as it has been written-off completely.  This means that the company is paying more tax in the second year relative to the earlier scenario (but no more and no less tax overall).
This Case Study illustrates the importance of meeting the 30 June 2017 deadline this financial year.  After this date, the write-off threshold reverts back to $1,000.

ASSET ELIGIBILITY
Having determined that a business is eligible, the asset itself must be eligible for the write-off.  Basically, all depreciable assets (including second-hand assets) used in a business are eligible for the $20,000 write-off – including motor vehicles, furniture, computer equipment, machinery etc.  The following assets are however, specifically excluded from the write-off as they have their own unique depreciation treatment:

  • Horticultural plants
  • Buildings (these are dealt with under the Capital Works provisions)
  • Primary production assets for which an entity has chosen to use the Uniform Capital Allowance (UCA) depreciation rules rather than the small business depreciation rules, and
  • Assets leased out to another party on a depreciating asset lease.
Financed assets are also eligible.  Assets that are the subject of a commercial loan, chattel mortgage or hire purchase would all qualify.  Assets that are the subject of a lease however do not qualify for the write-off due to the fact that the ownership of the asset under lease remains with the finance company.

SBEs can access this instant asset write-off concession simply by claiming the write-off on the business’s return (or your personal return if you are a sole trader).

SIMPLIFIED PAYG INSTALMENTS

SBEs that report and pay PAYG instalments quarterly can elect to pay instalment amounts worked out for them by the ATO (known as ‘Option 1’).  This ATO fixed dollar amount is then printed on your quarterly Activity Statement at label T7 or your instalment notice.  Adopting this option can save you time in working out the instalment amount you need to pay.  It also removes the risk of under or over estimating PAYG instalments and the resulting penalties that may be applied by the ATO.

You can choose this option in your first quarter of the income year (typically, this is the Activity Statement or instalment notice due in October).  Once chosen, this option applies for the whole of the income year.

TAX TIP
Where you elect to pay using Option 1, you are still permitted to vary the ATO instalment amount if your current year business or investment income is trending less than last year.  This may be the case where for example:

1. You are downsizing
2.  You are experiencing reduced sales compared to last year
3.  Your expenses have increased from last year.

In making a downwards variation, be aware that penalties may apply if your variation results in you, or your business, paying an amount that is less than 85% of the actual tax payable on your business and investment income for the financial year.  Therefore, before you make a variation, consult your Accountant.

SIMPLIFIED GST INSTALMENTS

In a similar vein, SBEs may be eligible to pay their GST liability on an amount worked out for them by the ATO – therefore, decreasing administration time for your business.  The ATO will notify you of your eligibility on your business’ first quarterly Activity Statement for the year (generally the September quarterly Statement).  If you choose to use this method you must inform the ATO by selecting this option on that Activity Statement.  Generally, your business will be eligible where your business:

  • Is a SBE (see earlier criteria, and note the proposed increase in the turnover threshold to $10 million)
  • Is not required to lodge your Activity Statements on a monthly basis and have not elected to do so
  • Has a current lodgement record of at least 4 months
  • Is not in a net refund position.

Note that even if you are eligible, your election can be disallowed if your business has a history of failing to comply with your tax obligations.  The benefit of this concession is that it saves you time in working out the instalment amount you need to pay.  It also removes the risk of under or over estimating your GST instalments and the resulting penalties that may be applied by the ATO.