This is a good time of year to think about adding that much needed piece of equipment to your business. Whether it is a ride-on-mower or a compact tractor for your farm business or upgrading those PCs for your staff, you could be in a position to take immediate advantage of the $20,000 instant tax write off from the ATO. There are also other options to consider if you are looking at equipment over $20,000. Ben Millar from Express Fund offers up two options to consider for your end of financial year tax position.
1. Instant $20,000 Tax Write-Off – If you purchase a piece of equipment for your business for $20,000 or less, you can claim the full amount back immediately to reduce your 2017/18 tax bill. There is no limit on the number of items a business can claim this financial year. A chattel mortgage in this instance, could be a good way to reduce tax and help cash flow over the next 12 months. Learn more here.
2. 12 Month Rule – If you purchase a piece of equipment before June 30 and pre-pay 12 months of lease payments, you can claim the total amount off your annual income. For example, a small business or an individual incurring deductible non-business expenditure, can claim an immediate deduction under the 12-month rule for prepaid expenditure (such as a lease) if the payment is incurred for an eligible service period not exceeding 12 months and the eligible service period ends in the next income year. Learn more here.
For example, John needs a new tractor but is unsure about the year ahead. There is potential for him to buy it now under a lease arrangement and claim the next 12 months as an instant deduction. Say the tractor is $100,000, and the 12 months’ worth of lease payments are $29,000. That means John can have the tractor now and it will cost him $29000 minus 30% (company tax) = $20300. That’s a saving of $8700 with the bonus of better productivity, reliability etc.
For more information on equipment financing and leasing contact Ben Millar at Express Fund on firstname.lastname@example.org or 0447 821 431.
The information supplied in this post is of a general nature and is not intended as personal financial advice. Before acting on any information, readers should consider the appropriateness of the information provided and are advised to seek independent financial advice.