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.

Highlights:

• 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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