Way back in 2015 the Government introduced measures for small businesses to potentially claim a full income tax deduction for the purchase of assets costing less than $20,000 (you can read my initial post on this here).
There’s been a lot of talk about this lately for a couple of reasons.
First, next week is the end of the financial year and many taxpayers and businesses start to panic right now and want to get as many tax deductions as they can get!
Also, the original measures were to expire on 30th June, 2017 (ie: next week!)
I wouldn’t be me if I didn’t have a couple of comments on this, so here goes:
- the measures have been extended to 30th June, 2018 so there is another year to take up this option
- it’s never a good idea to spend money you don’t have on items you don’t need – to get the $20,000 deduction you still need to spend the money, and you get a tax deduction for the amount which saves you the amount spent multiplied by your relevant income tax rate – I’ve heard a few taxpayers indicate that if they spend $20,000 on an asset they’ll get $20,000 back from the ATO and this is NOT correct!
- The full cost of the asset must be less than $20,000 including all on costs (such as transfers of vehicles purchased through private sellers)
- The full cost of the asset must be less than $20,000 even if you only claim a portion of the amount for business use
- And, as per the general depreciation rules, the asset must be installed and ready for use to be eligible to claim the deduction, it is not enough to order and “pre-pay”
Finally – I’ve read a few articles this week in the general news space about “don’t miss out on your tax deductions”, or “did you know you can claim these expenses?” – most of these articles are directed at individual tax payers yet they have referenced purchasing a piece of art for your office up to $20,000 – this $20,000 write off is for SMALL BUSINESSES only, not employee taxpayers.
Please, please, please – never make any assumptions when it comes to your personal income tax deductions or the deductions of your business, and instead of taking your tax advice from the mainstream media, always check in with The Tax Chic first!