What does the $20,000 deduction involved?

The Government has announced that businesses with a turnover of less than $2 million are eligible to immediately deduct as many assets that cost less than $20,000 and also acquired from 7:30pm, 12 May 2015 until 30 June 2017.

If you are running a café, assets may include new kitchen equipment or new tables and chairs. If you are a tradie this may include new tools and a car.

This is a huge increase from the current instant asset write-off threshold of $1,000.

This proposal is to help small businesses expand accelerated depreciation. What this means is that for tax purposes, accelerated depreciation will enable greater deductions in the earlier years of the life of an asset. Overall this maximises the cash flow of small businesses.

What is excluded?                                           

Assets excluded from this proposal are horticultural plants (fruits, vegetables, nuts and flowers) and in-house software allocated to a software development pool (computer software or a right such as a licence).

Even though assets costing $20,000 or more cannot be immediately deducted, they can be added together and depreciated at the same rate. In the first income year, a 15 per cent deduction is allowed and a 30 per cent deduction is allowed for each income year after.

Determine whether you are eligible for the upfront deduction.

Are you thinking of purchasing assets such as a car, furniture or equipment? Schedule an appointment with us to review any plans for capital expenditure by clicking here or call us directly on (03) 8511 4047.