I’d like to discuss a decent change to the tax law that stands out from the vast majority of changes because it actually benefits Small Business financially; simplifies admin; reduces compliance costs and may cure a few headaches as well.
In the past, switching clients to SBE (Small Business Entity) was something that accountants might not bother with, but the benefits have now reached a tipping point in my opinion. You may not be getting the maximum tax breaks possible unless you do. Has your accountant switched your business over to a SBE? If the answer is “No”, then read on…
Over 2 million small businesses with an annual turnover of less than $2 million may be able to access a range of tax concessions not available to larger businesses. Such concessions include Income Tax, Capital Gains Tax, GST and FBT just to name a few but it’s a tax break for small business effective 1 July, 2012 that could have a significant impact on your bottom line whilst simplifying your tax affairs.
Earlier this year, the Australian government announced instant asset write-off and simplified depreciation changes for small business. These changes enable small businesses to write-off depreciating assets costing less than $5,000 (up from $1,000) in the income year in which they started to use the asset, or have it installed ready for use. This limit was subsequently increased to $6,500 as part of the carbon pricing announcements. It also allows for most other assets to be depreciated in a single pool at a 30% rate.
This benefits you by claiming $6,500 as many times as you like off your taxable income! For example, you need a new computer system which has an invoice value of $50,000 – if each individual asset eg hard-drive, monitor, printer etc is under $6,500 then you write-off the whole $50,000, reducing your taxable income for the year 2012-2013 year by $50,000.
Cash flow a problem? No worries – finance the computer system and you still take full advantage of the immediate write off and have the added bonus of claiming the interest when the goods are used for business use purposes.
Small businesses no longer have to wait for end of financial year purchases as a tactic for maximising depreciation benefits.
It is wise to consult your accountant on these changes to make sure that you are getting the full benefit of the new ruling.