In case you missed it, the federal budget for 2015 was recently announced with a variety of changes for small businesses, most of them pretty positive. One of the biggest highlights is that small businesses are now entitled to a 100% tax deduction off any purchases under $20,000 for all purchases. That’s a big jump from the previous $1000 threshold, and means that small businesses now have a great deal of flexibility in investing in new asset purchases.
But are you eligible and how does this work? Read on for more information about this new announcement.
What’s the definition of a small business?
A small business for the purposes of this policy are classified by their annual turnover. For this announcement, small business are those with an annual turnover of less than $2 million each year.
What can be claimed?
Small businesses can claim expenses made on any item that assists in running the business. Assets that are classified under this include, but not limited to tools, software, printers, computers, furniture, etc. Best of all, you can have unlimited purchases under this scheme.
With the threshold raised from $1000 to $20,000, the new depreciation rules open up a wider range of possibilities for asset investments, including high value items such as cars, high value IT hardware, and of course security installations, including security camera systems, alarm systems, and electronic access control systems.
When will this policy end?
This policy is due to end on 30 June 2017.
How much will I get back?
All of the above expenses can be claimed as an immediate deduction from your assessable income. It will mean that you will effectively receive a discount by your marginal tax rate on any items claimed under the policy.
For companies this will currently be 30%, however as of 1 July 2015 the tax rate for small businesses will drop to 28.5%. For smaller, unincorporated businesses, e.g. sole traders, partnerships, trusts, etc. the deductions would apply at the standard tax rate.
If you’re in a position where you’re able to move quickly on an installation, now would be the best opportunity to attain the most savings whilst the tax rate is higher, as you will get less back from these deductions in the new financial year.
Here’s an example:
Joan operates a small food manufacturing company. Her taxable income is $100,000 for FY2014/15. Joan invests in an security camera system for her factory to keep an eye on her employees for OH&S reasons for a total of $8,000. Without the deduction, Joan would have paid $30,000 in tax. After deducting the asset, Joan will save $2400 on her tax bill.
This new policy should be a boon for small businesses Australia-wide and will make it easier to invest in assets which make doing business more efficient, more cheaply. Electronic security of all kinds is a necessity for so many businesses these days and we’re happy offer solutions which now sit under the increased threshold.
Note: Obviously we’re electronic security specialists, not professional tax advisors. Please ensure you seek professional advise to determine whether you are able to claim a deduction for such purchases and more about this policy as it relates to your circumstances. For more information, please see the Australia Taxation Office’s information on the new policy announcement.