Tax Incentive for Small Business Owners - Expanded to $30K

What better time to splash some cash than around the time of a federal election campaign and what better way to secure the votes of small business then to offer a great big tax incentive.

The federal budget announcement regarding the instant asset tax write off scheme, in April, was one of the small business tax incentives that perhaps helped secure their position as leaders after the election.

The coalition announced it will increase the instant asset tax write off threshold from $25,000 to $30,000 and expand the eligibility to companies with turnovers of up to $50 million.

When Does it Apply?

The new rules will be effective immediately from budget night 6th April 2019 and will be in place until June 30th, 2020. The government has baulked at the call to make the scheme permanent, instead opting to extend it for yet another year.

This effectively creates a tiered system for the 2019 financial year.

• The first tier will be the $20,000 threshold for depreciable assets obtained before 29 January 2019;
• The second being the $25,000 threshold for assets first used or installed between 29 January 2019 and 2 April 2019;
• And the third tier being the $30,000 threshold for assets first used and installed after the 2 April budget announcement and before 1 July 2020.

What’s The Purpose?

This pre-election promise is part of a plan, suggesting the expansion will improve cash flow for small and medium businesses, while boosting spending and investment by owners.

So How Does the Instant Asset Write Off Work?

Assets costing less than the applicable instant asset tax write off threshold are 100% written off in the year they are bought and used (or installed ready to use).

Small business operators and owners will get the benefit of an immediate deduction, rather than depreciating an asset over the term of its useful life. This applies whether the asset is new or second hand.

This is not a refund. The instant asset tax write off is a tax deduction that reduces the amount of tax your business has to pay.

By Nicole Kelly | ABA TAX