Do you have a small to medium size business? Have you heard about the instant tax write-off? Well if you haven’t, you’re certainly missing a trick. The government has introduced this measure to enable SMEs access to claim an immediate tax deduction by writing off the entire value of an asset used for business purposes. This means your next truck or ute could provide you with a significant tax break.
Recent changes and eligibility
The instant tax write-off was once restricted to small businesses, those with a turnover below $10m per annum. This program has now been extended to incorporate medium size businesses as well, up to and including annual turnover of $50m. All you have to do is conduct business in the year it is purchased, with the asset – not costing more than a designated threshold amount – ready for use before mid-2020.
In other good news, the maximum write-off has increased from $20,000 per asset to $30,000 per asset. Other changes affect the amount which you can claim throughout the financial year, with this threshold amount depending on when you bought the asset:
| Depreciable asset bought | Before January 29 2019 | Jan 29 2019 – Apr 2 2019 | Apr 2 2019 – Jul 1 2020 |
| Threshold amount | $20,000 | $25,000 | $30,000 |
How it benefits you
With more and more business owners now entitled to claim the instant tax write-off, and the maximum value also increasing, some owners may be able to potentially improve cash flow by minimising tax debt. Instead of having to pay tax, it could conceivably help you free your purse strings to invest back into your business and help it grow.
In order to claim the benefit you will need to lodge your claim alongside your tax return for the financial year. Be wary if you are involved in a partnership with another person, as the rules will differ. This is because the individuals do not own the asset in question when it is bought through a partnership. Additionally, if your partner buys an asset under their name, that won’t comply with the requirements for you to claim the instant tax write-off when submitting your own tax return. For your partner to be able to claim the deduction they must be a small business tax payer.
With some of the technicalities around partnerships, and even individual financial circumstances, it helps to engage an expert to discuss your situation. Be quick however, as the instant tax write-off is scheduled to remain in its current format until June 30 2020, with the prospect it may reduce to just $1,000 after that.
The Fincar team is here to help you with all your financing needs. Contact us today to help arrange your next car or equipment loan.