This article has been written by Geoff Rogers from Camden Valley Financial Solutions, and reproduced with his permission.
The accelerated depreciation measures for small business announced in the Budget on 12 May 2015 are effective right now, and have now been approved by parliament as laid out on budget night.
To recap, Small Business Entities (those in business with an annual aggregated turnover of less than $2 million) are now able to totally write-off/deduct the net of GST amount from their taxable income in the year that the asset is first installed ready for use, depreciable assets costing less than $20 000 (net of GST) which is up from the previous amount of $1 000.
By bringing forward the purchase of depreciable assets to before 30 June, you can improve your business’ 2014 /2015 tax position. Otherwise the change is effective for purchases up to 30th June 2017.
The new $20 000 threshold applies to all types of depreciable assets except those that have their own specific rules (such as horticultural plants, in-house software and trading stock).
So if you have equipment, IT Equipment, machinery, furniture, cheap vehicles, tools or other depreciable assets that you are planning on purchasing, there is no better time than now.
Assets valued at $20,000 or more can continue to be placed in the small business simplified depreciation pool and depreciated at 15% in the first income year and 30% each income year thereafter. If that pool balance in the current or future years up until 30 June 2017 drops below $20,000, it too can be written off or deducted in full off taxable income.
Tax rate changes for small businesses have also come in for the 2016 tax year as a 1.5% cut in the company tax rate to 28.5% or for sole traders or individual partners in a partnership a 5% reduction in tax payable on their business profit (up to a maximum $1000 tax reduction).
Should you require further clarification, please do not hesitate to contact your accountant or Geoff at Camden Valley Financial Services on 02 4647 4088.
Image courtesy of Michelle Meiklejohn at FreeDigitalPhotos.net