If you run a small to medium-sized enterprise (SME), you should be aware of the new small business tax write-off that has significantly raised the level of business purchases that are tax deductible.
Legislation confirming a $20,000 tax write-off for business-related items purchased after 7:30pm AEST on 12 May 2015 was passed on 15 June and will be valid until 30 June 2017. This is a hefty increase from the former write-off threshold of $1000.
All SMEs and sole traders will be eligible for the tax deduction if their business has an annual turnover of less than $2 million. This recent tax-deductible incentive was originally proposed in the 2015 federal budget to encourage SMEs to spend now and invest in growth. Depending on whether your purchases exceed the threshold, you should save more on your taxes if you spend on your investments sooner than later.
Any and all physical Items relating to the business may be deducted from tax, which excludes software and services such as marketing costs. The net worth of tax deductibles items must not exceed $20,000.
Company tax rates are also dropping from 30% to 28.5% from 1 July for entities with an aggregated turnover of under $2 million. This is the lowest small business tax rate in almost 50 years.
To take advantage of these recent changes, small businesses should bring their necessary expenditure forward and defer income to the 2016 tax year when possible, accounting for their cash flow position. During the 2015 financial year small businesses should maximise tax deductions and minimise income to secure the best position for their accounts.
For businesses looking for a sign to purchase new assets for your company, now is the time to take advantage of the current opportunities to save on tax-deductible asset purchases.