It’s been quite some time since we saw any major changes to the way motor vehicle expenses are claimed in our tax return – but the 2015 Federal Budget has proposed two significant changes.
Currently there are four methods which can be used to claim motor vehicle expenses: the cents per kilometre method, the log book method, the 1/3rd of actual expenses method and the 12% of cost method.
The last two methods mentioned are rarely used and the 2015 Federal Budget proposes to remove them from use – leaving the cents per kilometre method and log book method.
Each of the remaining methods have specific documentation and record keeping requirements and you should familiarise yourself with these, especially if you are required to switch from one of the other methods.
The second significant change to claiming motor vehicles expenses relates to the cents per kilometre method. There are currently three separate rates to be applied depending on the engine size of the vehicle owned and used – these will be replaced by a single rate of 66 cents per kilometre up to 5,000 kilometres per year.
These changes are expected to commence on 1st July, 2015…
One of the biggest measures for small business in the 2015 Federal Budget was the announcement of the “Small business asset accelerated depreciation write-off up to $20,000 per year”
The measure provides an immediate tax deduction for small businesses (annual turnover less than $2 million), who purchase and use or install ready for use, assets costing less than $20,000 (the previous threshold was $1,000 or $6,500 depending on the purchase date and the threshold will revert to $1,000 from 1st July, 2017).
The threshold applies on a per asset basis, meaning that several individual assets with a purchase cost of less than $20,000 may be eligible for the immediate deduction – this is great news if you have a few large items needing replacement.
This measure has the potential to save many small businesses a significant amount of income tax which in turn provides a great benefit to cash flow – but the real cash flow benefits will depend on your personal circumstances.
The types of assets which may be purchased and written off include cars, delivery vans, kitchens, machinery and tools…essentially most capital items that would otherwise have to be depreciated over a number of years!
If you are unsure if you are eligible for this accelerated depreciation, or if you’d like to quantify the impact, please discuss with your accountant!
A couple of weeks ago the 2015 Federal Budget was delivered, and now that we’ve all had a bit of time to digest it (if you have been so inclined…) I thought I’d take some time to discuss a couple of areas of interest over the course of this week.
In recent years the Government have alluded to a reduction in the company tax rate for small businesses. While this was a positive measure, I always felt that it wasn’t really going to help many small businesses – why, you might ask? Because only approximately 30% of small businesses are operated through a company structure, most are sole traders and partnerships – and as such, this cut to the tax rate wasn’t going to have an impact on them.
In the recent budget the Treasurer announced a discount of 5% (up to $1,000) on income tax payable by individuals on business income from a non-corporate entity where that entity has aggregated turnover of less than $2 million. The small business tax discount is to apply from 1st July, 2015, you just need to remember that it is not actually a reduction in your tax rate, but if this applies to you, you will receive a rebate in your tax return.
It’s a welcome measure to all small businesses (including mine!)…
To round out our week regarding deductions, I wanted to point out one particular deduction where special rules apply…superannuation.
Regardless of whether you are making the superannuation contribution for your employees or for yourself, in order to claim a tax deduction for the amount, there are a couple of conditions…
Firstly the amount must be physically paid and received by the superannuation fund by 30th June – if you usually wait until the end of the month to make these payments, you might want to diarise to do the June payment a little earlier so there is enough time for the payment to be processed by the banks.
This is particularly important if you or your employees have a strategy in place to maximise concessional contributions for the year – if you don’t get that payment in on time, there can be significant tax implications!
Also, if you are making a personal contribution, you will need to notify your superannuation fund of your intent to claim a tax deduction so they can record it correctly.
So remember…diarise those June superannuation payments so you and your employees don’t miss out!