A nice sweetener

By Paul McKinley
Optometry Finance Australia

 

The instant asset tax write-off is still available until 30 June 2017 but business owners need to act before then to take advantage of it.

Busy practitioners sometimes don’t turn their thoughts to the end of the financial year, tax planning and benefits such as the instant asset write-off until meeting with their accountant some time in June.

Often with medical equipment, there is a lead time between when the order is placed and when the item is used or installed and ready for use. Placing an order for equipment in June 2017 may mean you miss out on the tax deduction.

It is worth recapping some key points.

• The instant asset write-off is available for assets acquired between 12 May 2015 and 30 June 2017.

The 100 per cent tax deduction is available in the year that the asset is first used or installed and ready for use. For example, equipment ordered mid-June 2017 and delivered July 2017 would not qualify.

• The limit is for assets costing less than $20,000.

For businesses registered for GST, which is mandatory if the turnover is greater than $75,000, the purchase price of the asset can be up to $21,999, so that when you deduct the GST, you are left with an asset with a net cost of $19,999, and therefore it qualifies.

Assets with a GST-exclusive cost of $20,000 or more will be deemed ineligible. If the asset costs, for example, $30,000, then small businesses can still elect to use the pooling arrangements and depreciate the cost at 15 per cent in the first year and 30 per cent thereafter.

• The definition of a ‘small business’ for the purposes of the instant asset write-off may change.

Until 30 June 2016, the turnover threshold for small business was $2 million. From 1 July 2016 to 30 June 2017, the threshold will increase to $10 million, provided Parliament passes the legislation which was introduced on 1 September. This would mean many more businesses would be eligible to claim the instant asset write-off.

• There is no limit to the number of eligible assets that you can claim under the instant asset write-off deduction, as long as they fall under the $20,000 threshold referred to above.

• Both new and used assets are eligible, whether purchased from a registered business or a private vendor.

Timing is important when considering an asset purchase with a view to claiming the instant asset write-off. Don’t leave it until June 2017 to make a purchase decision. Whenever making purchasing decisions involving tax incentives, you should consult either your accountant or an independent financial adviser.

While tax deductions should not be the sole purpose for buying an income-producing asset, it is a nice sweetener.

·        The definition of a ‘small business’ for the purposes of the instant asset write-off may change.

Until 30 June 2016, the turnover threshold for small business was $2 million. From 1 July 2016 to 30 June 2017, the threshold will increase to $10 million, provided Parliament passes the legislation which was tabled on 1 September. This would mean many more businesses would be eligible to claim the instant asset write-off.