Buying business equipment: Should I use a loan or a lease to take advantage of the $20,000 instant tax write off?
Use a business loan to fund your asset purchase and take advantage of the $20,000 instant asset tax write off. You’re at least $400 ahead on a $10,000 asset and you can re-sell it at any time*.
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The instant tax deduction helps small businesses by enabling them to bring forward deductions they wouldn’t otherwise be able to, and use that extra cash in their business.
What is the instant tax deduction? The instant tax deduction is for assets costing less than $20,000. Assets that cost $20,000 or more must be deducted over time.
When does it end? It applies to assets purchased from now until June 30, 2017.
Who qualifes? It applies to businesses with turnover under $2 million in FY16. It has been extended from FY17 to businesses with turnover under $10 million.
How does it work? A small business can purchase assets up to the value of $20,000 and get an immediate tax
deduction for them rather than having to write them down over the following years.
1. Automate systems
To boost revenue and profits a small business owner almost always needs to scale up. Technology has made it easy to automate activities such as accepting bookings, sending out invoices and rostering staff. While the return on investment will obviously vary, automation can have a big impact on the bottom line. A 2015 survey found businesses saw a 34 per cent average increase in sales revenue after automating their marketing.
2. Buy equipment
There has never been a better time to update equipment and ensure processes run more smoothly.
Examples of qualifying items include:
- IT hardware including desktop computers, printers, scanners, photocopiers
- Office and shop fittings including new café tables, display and shelving, kitchen equipment, signage, air conditioners
- Work vehicles including utes, forklifts
- Tradesmen’s tools including machinery, lathes, hoists, plant and other equipment, sheds and storage containers for equipment.
The new laws also include changes to allow primary producers to immediately deduct capital expenditure on fencing
and water facilities such as dams, tanks, bores, irrigation channels, pumps, water towers and windmills.
- You should check with your tax advisor before you buy an asset to ensure that you and the asset are eligible.
- Assets excluded include horticultural plants and in-house software allocated to a software development pool. In most cases specific depreciation rules apply to these excluded assets.
- If a business isn’t making any profit then a tax deduction is of no use (they should wait until their business is making a profit to use it).
- Keep to the rules. Any business should be prepared to be audited.
- Be careful of the definition of ‘small business’, especially if you are part of a group of companies. In order to qualify for these concessions, businesses must align with the Australian Taxation Office (ATO) definition of a small business, which is an individual, partnership, trust or company with an aggregated turnover of less than two million dollars.
Not all small businesses have spare cash lying around at tax time. We can support your business and provide a business loan to purchase the assets you require now and write them off before the end of the financial year.
- Business loans from $5,000-$250,000 with no security required
- A simple, easy online application process
- Fast decision usually within 24 hours^
- Cash flow friendly repayments
When you apply and start a new loan before 20 June 2016, you’ll get a 2-week payment holiday! Hurry, this EOFY offer is only available until 30 June 2016.
The team at Naritas are experts in delivering timely guidance & finance approvals. We have over 100 lenders on our panel & a high quality team of dedicated advisers to steer you efficiently through the approval process.