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$20k Small Business Instant Asset Write Off

8 June 2017

If you are a small business operating in Australia, then this is great news for you. In 2015 the government introduced an accelerated depreciation incentive scheme to benefit small businesses. This $20k small business scheme allows small businesses to instantly write-off assets costing less than $20k.

This scheme is due to end on 30th June 2017 so small businesses have one month to take advantage. Recently the small business minister mentioned in a news release that the government was working towards extending the scheme a further 12 months, however this has not been legislated.

What classifies a Small Business?

A small business is any business with an annual turnover of less than $2 million dollars.

However, from July 1st 2016 the government increased this threshold to $10 million dollars (aggregated turnover) to provide further support. This means the scheme is now available to a further 90,000 businesses across Australia for this financial year. For full details read the Budget 2016/17 report.

Does the $20k Small Business amount include or exclude GST?

As summarised by the ATO,

  • If a business is registered for GST, then the GST will be excluded from the cost of the asset.
  • If a business is not registered for GST, then the GST will be included in the cost of the asset.

What assets can I claim a deduction on?

The scheme refers to any asset involved in running a business. This applies to new and second hand products as outlined in the ATO fact sheet.

Asset examples
  • If you are a trade business such as a builder, electrician or painter, this could include the tools and access equipment that you use every day for your business.
  • If you are retailer or warehouse owner, this could include pallet trucks, order pickers, forklifts or anything used to move pallets and lift products.

So how does this $20k Small Business Instant Asset Write Off work?

When a small business purchases an eligible depreciating asset under $20k, they can claim the full cost towards reducing the taxable income for that financial year. That can result in thousands of dollars saved in tax payable for that small business.

Example

Tony Smith purchased a scissor lift and trailer for $19,890 for his electrical company this financial year. He uses this scissor lift for work purposes only. The company’s total assessable income for 2016/17 comes to $250,000. Tony’s company is eligible to immediately write off the total cost of the asset this financial year. Let’s illustrate this below.

$20k small business instant asset write off on  assets less than $20,000
XYZ Electrical Pty Ltd
  • $250,000 (assessable income) – $19,890 (deductions) = $230,110* (taxable income).
  • This means the company’s taxable income will now be reduced to $230,110 instead of the full $250,000.
  • Applying the small business company tax rate of 27.5% on the Tony’s taxable income of $250,000, the tax payable would be $68,750.
  • If he uses the eligible asset to reduce the taxable income, 27.5% on Tony’s taxable income of $230,110 will now only be $63,280. That’s a tax saving of $5,470*.

*This example is general in nature and only used to demonstrate how the accelerated depreciation scheme may apply to a business. This doesn’t take into consideration a business’s personal situation or circumstances. We recommend businesses seek professional advice from their licensed finance advisor or accountant for eligibility.

Eligible products United are offering

To further promote this great incentive, United is offering a range of products under $20k to help small businesses.

Small Business Offers under $20,000

CAT forklifts and pallet trucks
Elevah Electric Ladder & Stock Pickers
Haulotte electric scissor lift and trailer package
PLUS any of our used forklifts for sale under $20k

 


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