Commonly asked questions regarding the immediate deduction for small business depreciation
June 2, 2015
We have been receiving a lot of enquiries around the immediate deduction for small businesses for depreciating assets costing less than $20,000. The most common questions are answered below:
* Please note that although this new legislation has been introduced to Parliament, it must be passed by the Senate before it becomes law.
Am I eligible?
If you are a registered business and turn over less than $2 million you can claim.
How much can I claim?
Eligible businesses can purchase any new vehicle, new machinery or new equipment related to their business up to $20,000 and will be able to claim the full amount from your income to reduce your tax liability.
Can I buy multiple assets?
There is no limit to the number of items a business can claim as long as each item costs less than $20,000 (excluding GST).
Can I finance the asset?
Yes, you can. However, you need to ensure that you choose the correct finance type such as Chattel Mortgage/Equipment loan.
When does it start?
The small business tax deductions will take effect as of budget night and will end on June 30, 2017.*
Does the immediate deduction include cars?
Cars are included.
Will immediate write-off be available for second hand assets, or only for new?
Second hand assets are included, the asset must be ‘new’ to the business.
Does this mean I can spend $50,000 on an asset and get an immediate $20,000 deduction?
Immediate write-off is available only where the asset costs less than $20,000. It follows that an upfront deduction of $20,000 will not be available for assets costing $20,000 or more.
Can you get under the $20,000 threshold by asking a car dealer to invoice the car and accessories separately?
No. The total cost of the car including accessories will determine whether the immediate write-off is available.
Can I buy a small car for family use through my business and get an immediate write-off?
While the write-off may be available in these circumstances, be aware that private use of a car by an employee (including an employee of a family business) or associate of an employee (such as an adult son or daughter) will raise FBT issues. You will need to ‘crunch the numbers’ to work out whether your client will come out in front.
Please contact your accountant on 03 9727 6700 for advice specific to your circumstances.
The contents of this blog are informative in nature only. It is not intended to be advice and you should not act specifically on the basis of this information alone. If expert assistance is required, professional advice should be obtained.
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