Life as a small-business owner can be both satisfying and tough. It can feel like the world is on your shoulders as you try to balance everything on a daily basis. The irony is that daily routines can get in the way of informing yourself about support that can make life a whole lot easier.
Case in point: the federal government’s instant asset write-off scheme. Not only does it offer a huge financial benefit to small businesses, it was also recently expanded so more small businesses can take advantage – an additional 22,000 small businesses, in fact.
Unfortunately, many small businesses aren’t taking advantage of it. According to a survey by American Express, released November 2018, almost half (47 per cent) of small businesses were unaware of the instant asset write-off they could claim. Among those who were aware, just over half (52 per cent) had claimed the deduction as many don’t fully understand what the write-off entails.
There’s a huge incentive to get filled in on what this program offers. Starting 2 April 2019, the government increased the benefits to allow businesses with turnover from $10 million to less than $50 million to use the instant asset write-off to instantly deduct the value of an asset worth less than $30,000 in the year they bought it, instead of depreciating it over several years. The new rules will remain in place until June 30, 2020.
This level of tax relief means more businesses can think about investing in new or second-hand equipment that could boost their competitiveness. It means quicker improvements – and a quicker payback. The value of this can’t be underestimated, given the cash flow challenges that we know small businesses face.
It’s important that small businesses are aware of the specifics of the program and making the most of what they’re entitled to. This includes making sure you’re claiming the right type of equipment and that you’re actually installing and using that equipment in the year you purchase it.
In this example provided by the Australian Tax Office, if plumber Barry purchases a new van to use in his business for $22,000 and a trailer for $14,000, he’s spent $36,000. But luckily, the instant asset write-off threshold applies to each asset – so Barry is able to claim a deduction for both the van and the trailer in his 2019 tax return.
As a general rule, we recommend that small businesses reach out to their accountants and bookkeepers regularly to find out what their entitlements are. This is also an opportunity for accountants and bookkeepers to be proactive in spreading the word among their clients.
To make claiming the deduction easier and more likely, small businesses should ensure they’re keeping clear and tidy records of expenses. An online accounting system can help. It can also help to improve your likelihood of having a healthy cashflow that allows you to consider making asset purchases.
For those looking to make improvements in their business to get ahead, the instant asset write-off program can be a chance to no longer delay a game-changing investment in your business and to see a faster pay-off. However, it’s still recommended that you work with your accountant or bookkeeper before making any large investment decisions. Particularly if you are planning to finance it with a loan.
Let’s get the word out there. Inform yourself, get your records in order, and tell your friends. Do right by your business by taking the time to take advantage of instant asset write-offs.
Natira Drayton, Vice President and Country Manager, Intuit Australia