Any urgency in taking advantage of the $25,000 instant depreciation scheme by June 30 this year disappeared when Treasurer Josh Frydenburg last night raised the threshold to $30,000, and extending it from businesses with a turnover of $10 million to $50 million.
This extends the pool of benefactor businesses by 22,000, employing 1.7 million people. There were already over 3 million small businesses eligible at the $10 million threshold, and according to the Treasurer 350,000 – over 10 percent- had used the scheme in the years it has been running.
However, the instant write off is still not baked into the tax system, with the extension only running to the end of next financial year, June 30, 2020.
Businesses can write off multiple assets, each one up to that $30K limit.
‘It will be increased from $25,000 to $30,000 and it can be used every time an asset under that amount is purchased,’ the Treasurer (pictured right) said, ‘allowing a cafe to get a new fridge or grill, a plumber to buy new tools or a courier a new van.’
(Although with the soaring cost of electricity, solar panels and batteries would probably take precedence over more business-focussed assets.)
It can be a new or second-hand asset, but if it has a personal use component – say a car – then the deduction is proportional as well.
Assets that cost over $30,000 can’t be immediately deducted. They will continue to be depreciated over time using the ‘general small business pool’. BUT – you can write off the balance of this pool if the balance (before applying any other depreciation deduction) is less than $20K at the end of an income year.
It will cost the government $400 million to June 30 next year. It appears that the $30K threshold is available to businesses buying assets this year for write off from July 1. The asset would have to be first used, or at least installed, by June 30 this year to be claimed in the 2018/19 tax year. (Readers should confirm these details with their accountants – these measures are still to be legislated.)
Tax relief for low- and middle-income earners should boost consumer spending, some of which will hopefully see its way into the photo retail and professional photography segments. Household consumption, according to Treasury modelling, is set to increase from 2.25 percent growth in 2018-19 to 2.75 percent in 2019-20 and then to 3 percent in 2020-21.
No tax return, no ABN
– Buried in the budget minutia, there’s another good reason beyond asset write-offs for small businesses to get their tax returns in quickly: lodging an income tax return – presumably on time – will be a requirement for holding an ABN from July 2021.
The change is part of a suite of initiatives from the ATO to crack down on the black economy and phoenix businesses.
‘This measure will target ABN misuse, enhance the quality of the Australian Business Register data and improve ABN holder engagement and compliance,’ the budget overview stated.
While business owners are of course already obliged to lodge income tax returns with the ATO each year, many smaller businesses – particularly sole proprietors and partnerships – seem to sail under the radar for years on end, often with bad consequences for both the business and other taxpayers. The possibility of having one’s ABN rescinded makes adherence to the ATO’s rules more compelling.
But there was also a proposal to add red tape to the Australian Business Register, introducing a requirement for income tax returns to be filed as a condition for keeping an ABN.