Small business $20,000 tax write off
Recent changes are outlined below:
July 1, 2022
- Loss carry back for eligible companies extended to cover 2023 income year.
- Professional firm profits diverted to the professional's spouse or other associates to be reviewed under new Tax Office guidance.
- Corporate collective investment vehicle legislative regime introduced.
- Temporary full expensing of depreciating assets extended to include 2023 income year.
- Depreciable assets of a company joining a tax consolidation group have tax costs setting rules modified for assets depreciated under temporary full expensing rules.
December 9, 2021
- Reduced Pandemic leave disaster payment of $750 per week made available through to 30 June 2022.
August 5, 2021
- COVID-19 Disaster Payments are non-assessable non-exempt income in 2021 income year and later. Payments phasing out as vaccination rates increase.
July 1, 2021
- New Investment Engagement Service launched for businesses planning significant new investments in Australia.
- Tax Office small business independent review service made permanent for businesses with turnover < $10m, for income tax, GST, exercise, luxury car tax, wine equalisation tax and fuel tax credits. Requested before amended assessment issued.
- Small business income tax offset for individuals increased to provide a reduction of 16% for a tax payable up to $1,000.
- Self-managed superannuation funds can now have six members, increased from four members previously.
July 1, 2021
- Some COVID -19 state and territory business grants received by small and medium enterprises are non-assessable, non-exempt income for 2021 and 2022 income years.
- Certain state, territory and local government financial support for individuals and businesses suffering COVID-19 impacts made exempt where businesses have turnover less than $50 million and only in eligible programs.
March 31, 2021
- JobKeeper payments scheme ended.
October 5, 2020
- Boosting apprenticeship commencements subsidy (up to 50% of apprentice's wages) is assessable income.
June 4, 2020
- Homebuilder grant for new home or substantial renovation construction is not subject to income tax.
April 1, 2020
- COVID-19 cash flow boost payments are not subject to income tax
There was great joy, not only for small businesses but also for many retailers, from the 2015 Budget announcement of the $20,000 tax write-off. The economy will also benefit from the increased business activity which is resulting from this much needed measure.
- Any small business with an aggregate annual turnover of less than $2 million is eligible.
- The write-off applies to any business depreciable asset (new or second hand) acquired after 12 May 2015 until 30 June 2017.
- This measure replaces the previous instant asset write-off threshold of $1,000.
- It applies on a per-asset basis.
- An unlimited number of assets, each costing no more than $20,000 would qualify:
- If registered for GST, it is the GST exclusive cost which determines eligibility.
- If not registered for GST, then it’s the GST inclusive cost.
- Computer software purchased off the shelf is eligible.
- The cost of developing software in-house for use exclusively in the business is eligible if not allocated to a software development pool.
- In-house software allocated to a software development pool is excluded.
- Horticultural plants are excluded.
- Leased assets are not eligible as they are not owned.
- The benefit is the bringing forward of a tax deduction, not a tax saving.
- The amount of tax you save by pulling to deduction forward depends on your tax rate. If your tax rate is 30%, your tax benefit is 30% of the deduction.
- Remember, however, that you may get a further cash flow benefit because your PAYG for the following year may also reduce.
- If you later sell the item, the full sale price will become taxable income.
If your asset costs more than $20,000 you cannot claim this deduction. However you can elect to use the small business pooling arrangements and depreciate the cost of that asset at 15% in the first year and 30% each year thereafter.
The pool value threshold will also increase to $20,000. This means that an immediate deduction may be available if the balance of the pool (opening balance plus additions less sales) is less than $20,000.
Andrew and Tony Lovett
11 August 2015
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