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BlogMarch 21, 2020

Business Tax Deduction on Security Equipment

It is already nearing the end of financial year and it is an odd time for all of us given the current global circumstances…

While you are probably busy with business reporting and the headache that COVID-19 is causing, it is also a great time to get your home or business security in order.

Why you ask?

Small businesses here in Australia are entitled to a 100% tax deduction on purchases under $30,000, meaning that you have a great deal of flexibility in investing in new asset purchases, HOWEVER with recent government economy stimulation efforts, the tax deduction can be applied to purchases over $150,000.

The government has also expanded the access to this tax deduction to businesses with an annual turnover of up to $500 million (up from $50 million).
 
 
Woman holding briefcase during end of financial year
 
 
What can be claimed?

Businesses with an annual turnover of up to $500 million 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 to $150,000, 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.
 
 
Timing

This proposal applies from 12 March 2020 until 30 June 2020, for new or second‑hand assets first used or installed ready for use in this timeframe.
 
 
Here’s an example:
 
People working in a food factory
 
Business benefits from increased asset threshold:

Owen owns a company, Signal Food Manufacturing Pty Ltd, through which he operates a food production business in the northern suburbs of Victoria. Signal Food Manufacturing Pty Ltd has an aggregated annual turnover of $25 million for the 2019‑20 income year. On 1 May 2020, Owen purchases a new security system including CCTV, an Alarm System and Access Control for $140,000, exclusive of GST, for protection of his business.

Under existing tax arrangements, Signal Food Manufacturing Pty Ltd is not able to immediately deduct assets costing more than $30,000 and instead would depreciate the security system using an effective life of 12 years. Choosing to use the diminishing value method, Signal Food Manufacturing Pty Ltd would claim a tax deduction of $3,899 for the 2019‑20 income year.

Under the new $150,000 instant asset write‑off, Signal Food Manufacturing Pty Ltd would instead claim an immediate deduction of $140,000 for the purchase of the security system in the 2019‑20 income year, $136,101 more than under existing arrangements. At the company tax rate of 27.5 per cent, Owen will pay $37,427.78 less tax in 2019‑20.

This will improve Signal Food Manufacturing Pty Ltd’s cash flow and help his business withstand and recover from the economic impact of the coronavirus.
 
 
Conclusion

This new policy should be a boon for businesses Australia-wide and will make it easier to invest in assets which make doing business more efficient and safer for all involved. Electronic security of all kinds is a necessity for so many businesses, especially during the tough times the country is experiencing now, and we’re happy that we can offer high-security solutions which now sit under the increased threshold.
 
 
Note: Obviously we’re electronic security specialists, not professional tax advisers. Please ensure you seek professional advice 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 here

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