One of the benefits for small business springing from the May 2015 budget handed down by the Federal Government is the proposed expansion of accelerated depreciation on assets from the previous $1000 threshold.
The proposal allows small businesses (with an annual turnover of less than $2 million) the opportunity to immediately claim their tax deduction on each new asset that cost less than $20,000. This measure applies to assets obtained after 7:30pm on Tuesday 12 May (until 30 June 2017). Sole traders and partnerships will need to seek further advice as they may be impacted by non-commercial loss rules and the new measure may will only apply if all the deductions from the business activity for the year exceed the income from that activity.
Eligible assets can include things like machinery, business equipment, cars and computer equipment (and some software). These measures apply to both new and second hand assets and are assessed on a per asset basis, so several assets that each cost up to $20,000 will qualify for the write-off, as long as they are ready to be used before 30 June 2017.
There are a small number of assets which will not be eligible under the scheme, including in-house software, primary production assets and horticultural plants, so it is important that you speak to us before making any purchases just to be sure. There are special rules that apply to Primary Producers, including accelerated claims for farm fencing, water facilities and silo’s.
It is also important to note that to date (June 2015) this can only be seen as an announcement and that there has been no legislation passed through parliament for it as yet, so this law will be retrospective if passed.
Small businesses will be required to keep records of their purchases in order to verify their deductions under this new measure
Whilst this is a generous gesture for SME’s, it should be viewed with clear vision. You should still be able to identify a good commercial reason for purchasing the asset in the first place, rather than buying an asset just to claim the tax deduction.
For more information about what your small business may be able to claim and how, please call Glenn or Ewen on 5338 7100 or email firstname.lastname@example.org
Sharp Accounting is a local accounting firm in Ballarat. Sharp Accounting nurture business growth by adding value through collaboration and shared knowledge.