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How to leverage the $30k business tax write-off


Last July, the federal government had planned to wrap up the $20k business tax write-off, lowering the threshold back to its previous level of $1,000.

However, in positive news for business owners, the powers that be have increased the offer to $30,000 and extended the threshold to 2020.

This tax break, available for small and medium businesses who have an annual turnover of less than $50 million, allows SMEs to deduct equipment, furniture or other capital items priced up to $30,000 immediately.

As a small business, this means you still have a limited amount of time to make use of this tax write-off!

What can you buy?

With this scheme still in play, business owners can benefit from the instant asset write-off that allows them to immediately deduct asset purchases of up to $30,000. This can help you to buy more equipment and other assets that will help you become more efficient and effective in business.

Any assets bought (totalling up to $30,000), regardless of whether they were new or second-hand, can be written off in the same financial year following simplified depreciation. Simplified depreciation is a set of rules that small to medium businesses can apply if their annual turnover is less than $50 million.

The $30k write-off can apply to assets like vehicles, computers, printers, furniture, and even kitchen equipment and air conditioners. However, it’s important to note that if the item is also for personal use, you must apportion that amount and deduct it from your claim.

For instance, if you buy a work vehicle that costs $24,000, and you intend to use it for 50% work purposes and 50% personal purposes, then you can claim $12,000 as a tax deduction. Under this scheme, you can claim it immediately in this year’s tax return – provided you buy it prior to 30 June.

What happens if you’ve purchased something that costs more than $30k? In this instance, these assets get pooled together and you can claim a percentage of them over time; 15 percent in the first year, and 30 percent in the years that follow. After the balance reaches an amount lower than $30k, you can then write off the rest of the claim as a deduction.

What will you be eligible for from July 1 2019?

If you’re an SME (Small-Medium Enterprise) or a solo operator, you’re also entitled to various tax deductions and write-offs. These include travel expenses such as airfares, taxis, accommodation and meal expenses, education expenses and even home office expenses.

You can also prepay a year’s worth of some expenses, like insurance policies, utility bills or relevant business subscriptions, which will allow you to claim deductions on these costs within the same year that you paid the invoice.

You should always endeavour to keep detailed records of all your claims, including receipts and invoices, so you’re prepared if you ever need to prove any purchases to the tax office.

Navigating businesses taxes and purchases can be confusing, especially when it comes to leveraging these types of tax incentives. If you’re looking to find some greater clarity around how to leverage this powerful opportunity for your business, the team at Morris Finance can discuss options for financing your latest purchase, to maximise cash flow and profitability.