By PowerBuy // 5 June 2015 // Related Categories: Tips
Do you need a new server? Is it time to update the boardroom projector? Are your desktop computers running more slowly than they used to? Perhaps you’ve put off capital expenditures because of the tax burden involved. If that’s the case, there’s good news. On 12 May 2015, the Australian Government announced its new Budget, which included numerous incentives designed to stimulate small business growth and encourage investment. The new Budget will enable owners of small businesses – that is, businesses that have an annual revenue of less than $2 million - to immediately claim tax deductions for any assets that cost less than $20,000.
What does it mean for you?
Traditionally, small business owners have had access to a small write-off threshold, allowing them to invest a nominal amount in capital and immediately claim it back on tax. Until May of this year, the threshold was set at $1,000 – now it’s 20 times higher. Pending legislative approval, the new rule will stay in effect until 30 June 2017. This gives businesses two years to take advantage of a rare opportunity to invest aggressively in their future growth.
Filling in the details
There are few exemptions to the new accelerated depreciation scheme. You won’t be able to deduct the cost of indoor plants or items that have their own depreciation rules (like capital works or assets allocated to a software development pool). Eligible assets that cost more than $20,000 can be progressively depreciated (that is, claimed back on tax) at a rate of 15 percent in the first year and 30 percent each year thereafter. And everything else? If it’s under $20,000 and will help your business grow – then whether it’s new or second-hand – you can claim it back straight away.
Where should you start?
For an IT company that’s looking to grow, one of the first things to consider is upgrading or replacing hardware that has become obsolete. Moore’s law tells us that computer processor speeds double every 18 months, which is a handy rule of thumb for keeping your equipment up to speed (literally). To help maintain your competitiveness
A crucial caveat
As with all Budget initiatives, the implementation of the accelerated depreciation scheme is subject to parliamentary approval. If it is approved, it will retrospectively include all eligible assets purchased from 7:30 pm on 12 May 2015. You can check the ATO website for news on the status of the legislation. If it’s successful, this might just be the year to bring your small business up to date.
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