TAX TIPS FOR SME BUSINESSES
Need to make a big purchase to help get your business moving? You’ve only got til 30th June to take advantage of the $150k instant asset write-off (IAWO) threshold before it’s reduced back to just $1,000.
As the end of financial year approaches, many businesses will be looking to capitalise on increased government initiatives and tax breaks to improve cash flow and help recover from the economic impact of the coronavirus.
Earlier this year, the IAWO threshold was increased to $150,000 (from $30,000) and access was expanded to include businesses with aggregated annual turnover up to $500 million (previously $50 million). The increased threshold applies for new or second-hand assets, first used or installed ready to be used between 12th March 2020 and 30th June 2020.
Taxation expert Shari Sutton, a partner at AMG Accountants + Advisors, suggests that "in addition to taking advantage of the extended IAWO threshold, SMEs might also want to prepay some expenses before 30th June to claim the tax dedication this year, and consider maximising concessional superannuation contributions."
What does the increased IAWO threshold mean for your business?
The IAWO threshold allows businesses to immediately deduct purchases of eligible assets, such as computers, machinery and tools, costing less than $150,000. New cars also qualify though can only cost up to $57,581 unless it is a commercial vehicle. The threshold applies on a per asset basis, so eligible businesses can immediately write‑off multiple assets.
Are You Eligible?
Eligibility for the write-off depends on a number of factors:
- aggregated turnover (the total ordinary income of your business and that of any associated businesses)
- the date you purchased the asset and it was first used or installed ready for use
- the cost of each asset being less than the threshold
As this is general advice only, we recommend that you speak to your tax advisors, visit the Coronavirus info and support page at business.gov.au or visit the ATO’s website to confirm your eligibility.
Make sure you buy those big ticket items by the end of this tax year as from the 1st July 2020 the IAWO will return to a threshold of just $1,000 and will only be available for small businesses with a turnover of less than $10 million.