Tax break hits the headlines
About 24 hours after the budget was announced, we saw the advertising campaigns start hitting the papers screaming out headlines like “20K tax break on forklifts!” “Buy now to claim the 20K tax write off!”. It was pretty obvious that this new budget was going to be big news for small business.
The ‘tax-break’ available to small businesses, refers to the government’s announcement that depreciable items acquired and installed ready for use between 12 May 2015 and 30 June 2017 will qualify for an immediate 100% deduction rather than being depreciated over a number of years. Provided that the asset costs less than $20,000 each excl GST.
Currently only assets that are less than $1,000 are eligible for immediate write-off, so lifting this threshold to $20,000 will make a huge difference to small business owners and hopefully boost the economy. This measure will have a significant affect on tax planning decisions for the current year.
There are two important things to consider when it comes to this announcement.
- Don’t count your chickens before they are hatched. At this early stage, the budget announcements are just that, announcements only. We will have to wait until the various measures are passed by both Houses of Parliament and we see the final legislation, before we really know the fine detail. It is perfectly fine to start planning and talking with your accountant, but major purchase decisions should be left until the details are finalised.
- Don’t allow tax incentives to be the sole driver for your business decisions. We recommend that asset purchases should be planned as part of the big picture for your business growth strategy. So if you are considering making some purchases that perhaps you weren’t going to make until this new write-off was announced, then please talk to your accountant first about how it fits with your cashflow, overall growth strategy and your tax planning.
There are a number of other interesting measures announced as part of this year’s budget including a 5% discount for businesses not using a company structure, company tax rate reduced from 30% to 28.5%, and accelerated depreciation for farmers. Check out our fact sheet>
The post Tax break hits the headlines appeared first on BMO Accountants.
