My newsagency software company Tower Systems on Monday shared information with newsagents on the instant asset write-off opportunity for small businesses that looks set to expire on January 1, 2014. Following my publishing of information advice was put out by another company that could be confusing.
The ATO website is clear on this issue. The opportunity applies to businesses with a turnover of $2 million or less. The maximum asset value that can be written off per purchase is $6,500. For example, you could not purchase $20,000 worth of assets in one transaction and seek an instant asset write off for $20,000 unless the items are identical.
- In order to qualify for these concessions, businesses must fall under the Australian Taxation Office (ATO) definition of a small business. The ATO consider a small business to be an individual, partnership, trust or company with an aggregated turnover of less than two million dollars.
- The existing rule allows businesses to write-off any depreciating asset with a total cost less than $6,500. The $6,500 threshold is applied on an asset by asset basis, without aggregation for identical assets, or assets forming part of a set. For example, if a café was to purchase new tables and chairs each individual table and chair would be considered against the $6,500 threshold which would probably allow the entire cost to be an outright deduction.
- It does not create additional taxation deductions; it brings forward more deduction into the year of the asset purchase. The $6,500 instant write off will allow tax deductions to be matched to cash outflows.
My advice is that you get advice from your accountant to ensure that asset purchases prior to January 1, 2014 are structured appropriately for your situation.