Hi Paul just curious my hubby and I started a business this year. We've previously bought most of our equip-ment before yesterdays announcement and were looking at getting a company car. As the business will probably make a loss this financial year. How will this work weve never done a business tax return. obviously if we lose money after paying payg and gst requirments we don't have to pay tax but if we acquired a car using our own funds/put them into the business next financial year when we make a profit. Say if we bought a car for $20,000 and had $20000 in profit we wouldn't need to pay tax until the profit was in excess of $20,000. Sorry for the dumb questions ive just been reading up on property tax and company tax. My head is so confused. Thanks
Claiming up to $20 000 immediate deduction
- Thread starter Burramys
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Hi Paul just curious my hubby and I started a business this year. We've previously bought most of our equip-ment before yesterdays announcement and were looking at getting a company car. As the business will probably make a loss this financial year. How will this work weve never done a business tax return. obviously if we lose money after paying payg and gst requirments we don't have to pay tax but if we acquired a car using our own funds/put them into the business next financial year when we make a profit. Say if we bought a car for $20,000 and had $20000 in profit we wouldn't need to pay tax until the profit was in excess of $20,000. Sorry for the dumb questions ive just been reading up on property tax and company tax. My head is so confused. Thanks
Does anybody know yet if this will apply to stuff sitting on the depreciation schedule right now?
We bought a second hand ute last year (April 2014) for $11,000 naturally it is sitting on the books as a depreciating asset. The old ute has been on the books for a good 4 years so maybe has approx $2,000 to go. Plus assorted machinery, there is less than $20k on the books right now. I am hoping we can recoup the whole lot now.
We bought a second hand ute last year (April 2014) for $11,000 naturally it is sitting on the books as a depreciating asset. The old ute has been on the books for a good 4 years so maybe has approx $2,000 to go. Plus assorted machinery, there is less than $20k on the books right now. I am hoping we can recoup the whole lot now.
I doubt it, the intention of this is to encourage businesses
to invest in upgrades etc and stimulate the economy, allowing people to claim retroactively doesn't make sense imo.
Would be nice though!
My best advice would be to seek personal tax advice. Try not to spend money to reduce tax (or increase a loss). Tax planning is often a great (small) investment so you understand direction and strategies to help you long term.
Possibly. If you are using pooling and are a small business and subject to the law being enacted !!
Same as any other deduction
1. Its a tax deduction. Deduction only really work if there is a profit. Profit falls. Tax falls. If no profit then the loss just grows.
2. You don't claim it as such like its a cash refund. The expenditure can be written off after last night when it occurs. So if you go to Tool City tomorrow then your deductions for 2015 will be enhanced by $20K (subject to GST). The 2015 return would include than increased deduction. Whether you get a refund or pay less tax needs to be checked.
However if you bought 20K of tools each costing $1k or less you could have done this all through the year !
Thanks for the reply and advice Paul. Makes sense now.
I think there might be a CGT implication if you sold the business. If an asset had been depreciated, you can claim the written down value against your CGT. But if it's written off immediately there's no residual value left to claim.
It's likely that there will be a 50% CGT reduction, so it's still worth doing even if you were on a higher tax bracket.
It's likely that there will be a 50% CGT reduction, so it's still worth doing even if you were on a higher tax bracket.
Gillard had a temporary increase for w/off to $6500 for a time but that ended and went back to $1K during 2014. Without this change assets costing $1,000+ would be depreciable in a pool at 15% for year one and thereafter 30% pa.
My understanding from reading the influx of emails I received yesterday is that if the total small business pool is less than $20,000 then it can be written off.
Yes and No. Tangible assets have always been a balancing adjustment. I have seen some foolish people structure their sale so that written off assets are sold at market value. (Buyers like that) This makes the "profit" on those business assets taxable as ordinary income and REDUCES the CGT issues. A very good reason why sound professional advice should be obtained before contracts are even contemplated.
Assuming that pooling has been used.
My understanding is that for small business to access the $20,000 deduction, pooling has to be used.
I thought that if it's 100% business use then it can be 100% claimed. I was already looking to buy a new farm ute (around $35,000) which will replace my current ute and is 100% business use.
My understanding is as follows: (in rough figures and in very basic terms)
-Purchase price - $31818 (after GST).
- Claimable at EOFY $20000
If my taxable income prior to purchasing the ute was $10000 it would now be $80000 minus any other deductions. Not sure if I'm on the right track?
Unfortunately no. Ignoring GST, assets up to $20,000 can be written off 100%.
Assets over $20,000 are to be added to the Small Business Depreciation pool, and depreciated at 15% for the first year and 30% thereafter.
So in your case, the whole purchase price of $31818 would be depreciated at the set rate.
Ok, thanks Dan, good to know. I've been shopping around anyway so it looks like the announcement wont change anything in that regard. I do have to spend about $10000 on fencing though, and I see we can write that off immediately now. For us it's not a case of panic spending but being able to better claim things we were going to spend anyway. I guess if there's something small businesses were thinking about buying it might just be a deciding factor.
And adjusted for private use.
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