The Federal Budget released 12 May, 2015 revealed some welcomed announcements for Small Business Enterprises. The deduction of capital expenditure of assets up to $20,000 has attracted considerable interest so to assist in understanding the benefits below are Q & A’s on the topic.
Q. Who is eligible?
A. The government has classified Small Business as entities (companies, trusts, partnerships or individuals) that have an aggregate business turnover of less than $2mil.
Q. What period is the write-off valid?
A. It’s effective on assets purchased from 13 May 2015 until 30 June 2017.
Q. Can I access it across a number of items?
A. Yes, if the purchase price of any individual qualifying asset is less than $20,000 excluding GST each purchase may be expensed in the year of purchase.
Q. Can I access it if I’m not trading through an entity?
A. Any Australian small business, regardless of trading structure will qualify if turnover is less than $2mil.
Q. Can it be applied on second hand items?
A. A qualifying asset needs only be ‘new to you’ so second hand items are acceptable.
Q. Does it apply to a second hand motor vehicle?
A. A motor vehicle with a purchase price of less than $20,000 excluding GST would be a qualifying asset. Apportionate of the tax deduction between business and private usage would be required.
Q. Is it the first $20,000 on a purchase above $20,000?
A. If an asset exceeds $20,000 then the entire purchase price is to be depreciated at a rate of 15% in the first year and 30% each year thereafter.
Q. Can I enter into a contract to buy now but pay next year when it’s delivered?
A. If you are accounting on a cash basis, the purchase will not be recognised until it is paid for, so it will need to be paid for before 30 June to qualify in that financial year.
Q. Do I have to pay in cash or can I finance the purchase?
A. It is the actual purchase that counts, regardless of how financed.
Q. Am I entitled to the deduction if I lease the equipment?
A. No, the write-off applies to purchased assets that would otherwise be depreciated over time by your business (not the leasing company’s).
Q. What type of finance fits the requirements?
A. Any type of finance where the business is the ‘owner’ (or deemed owner) up front, such as Chattel Mortgage, Commercial Hire Purchase, or business loan or overdraft
Q. Is the $20,000 threshold law yet?
A. At the date of writing (26-5-15), it is only an announcement and no law has been passed. However, the Federal Opposition have indicated they would support this particular budget measure.
Q. Who do I talk to?
A. Please call your usual Hanrick Curran advisor or speak with one of our Business Advisory Team on 07 3218 3900 if you have any further queries.