As the Federal Minister for Small Business, Kelly O’Dwyer, so eloquently put it on the ABC’s Q&A program on May 9, tax cuts from 1 July this year will give businesses access to instant asset write-offs. Illustrating a point about tax breaks for small-business people, she gave the example of a café owner with a turnover of $2 million who could now invest in a $6000 toaster which would see him drive up revenue and employ more staff.
As we approach the end of the financial year, it is the perfect time to think about what your capital expenditure requirements will be going forward, and also a good time to be reminded of the tax incentives that the Government introduced for small business entities in the 2015 Federal Budget.
A small business entity was defined as one with an aggregated turnover of less than $2 million. This initiative was to encourage small businesses to ‘have a go’ and invest, with new laws introduced to allow businesses to claim an immediate deduction for depreciable assets that were less than $20,000.
Any business that meets the definition of a small business entity may be eligible to claim an immediate deduction for the cost of depreciating assets acquired for less than $20,000.
A few points to consider in regards to this initiative:
- It applies to New and Used assets
- The increased threshold of $20,000 will apply until 30 June 2017
- You will continue to claim the deduction in the year in which the asset is first used or installed ready for use
- The GST exclusive amount is taken to be the cost of the asset.
This means that a small business will be able to claim an immediate deduction for the cost of each and every depreciating asset that they purchase for less than $20,000 i.e. it is not capped. This will be of enormous benefit to their bottom line and help businesses with their cash flow.
Restaurant and delicatessen owners, as well as other small business owners, can buy or upgrade assets including cars, vans, kitchens, machinery, and other items necessary to operate their business as well as use them as a tax write-off. Owners of commercial kitchens and restaurants can maximize this benefit and get the most efficient and productive commercial kitchen equipment to improve their workflow and profitability.
THE 2016 / 2017 BUDGET WAS RELEASED LAST WEEK, WITH THE GOVERNMENT INCREASING THE DEFINITION OF A SMALL BUSINESS ENTITY FROM THAT OF A TURNOVER THRESHOLD OF $2.0 MILLION TO A NEW THRESHOLD OF $10.0 MILLION FROM 1 JULY 2016.
Once the Budget has been ratified by Parliament, this means that businesses with a turnover of less than $10 million will be able to claim an immediate deduction for depreciable assets that are less than $20,000 as at 1st July 2016.
All depreciating assets are eligible, except for a small number of exclusions which receive different depreciation treatment.
Excluded assets include:
- Capital works
- Primary production assets for which the entity has chosen to use the normal depreciation rules rather than the simplified depreciation rules
- Assets leased out to another party on a depreciating asset lease.
If you feel that this tax incentive may benefit your business, or alternatively you have equipment requirements of a general nature, please let Caterlink know, and one of our friendly consultants will be more than happy to discuss how we can make this Federal Budget work for your business.
(Oh, and we sell toasters!)