Posts Categorized: Tax

$30,000 asset write-off – Part 2 of 3

In our second of three blogs, we look at another 7 tips and traps in respect of claiming the $30,000 instant asset write-off.

  1. Your small business must own the asset. Your business either needs to pay for it or finance it by a loan, hire purchase or by way of a chattel mortgage contract. Assets that your business leases from others do not qualify for the write-off (as one does not own the asset until the final payment is made or the lease contract is paid out early).
  2. The incentive also doesn’t apply to assets that are leased by your business to others.
  3. It’s not about when you buy the asset. Your entitlement to claim is based on when you held the asset first ready for use. So for assets you need to have installed, it is not when you buy it; it is when you can first use it.
  4. Make sure you when buy an asset to have the installation date agreed upon.
  5. Installation and delivery costs comprise part of the cost of the asset.
  6. When buying a car, make sure the delivery date will be before July.
  7. If you trade-in an asset, it is the cost of the new asset that qualifies. So if your business buys a car for $40,000 and trades in an old car for $8,000, there is no entitlement as the cost of the new asset exceeds $30,000.

Please keep come back to look at third listing of tips and taps in respect of claiming this valuable tax concession. In the meantime, we welcome any questions you may have – call us on 03 9899-7511.

$30,000 instant asset write-off – Part 1

If small businesses didn’t already love the instant asset write-off they will now!  The threshold was increased from $20,000 to $25,000 for assets first used from 29th January 2019.  And as of Budget night (2nd April) the qualifying threshold increased to $30,000!

Amongst many other assets, a $30,000 threshold brings a whole of quality cars into the realm of tax planning.

So if your business needs a small asset, now is the perfect time to buy it.

But before doing so, please ensure you have factored in the following considerations:-

  1. The claim is based off the ex GST price. So if your business buys a car from a car yard for $32,000, the GST exclusive price will be less than $30,000.
  2. However, if you buy a car privately, there will be no GST. So if you buy a car privately for $31,000, you will not be able to write-off the whole balance.
  3. Only buy an asset if you need it. So if a company registered for GST buys and asset for $11,000, it will get back $1,000 of GST and will have a tax deduction of $10,000. It will pay $2,750 less company income tax. It will still be $7,250 out of pocket. As tempting as this limit is, don’t get too carried away and buy assets that your cash flow cannot support.
  4. A tax deduction in the 2019 tax year will have a flow on effect as it will reduce the PAYG Instalments for 2019/20 and part way into 2020/21.
  5. An asset purchased in 2018/19 will also have a flow on effect for those small businesses paying GST under the instalment method. It will reduce the GST Instalments for 2019/20 and part way into 2020/21
  6. You need to elect or have previously elected to use the small business general pooling depreciation method. A business qualifies as a small business if its current year or prior year turnover is under $10,000,000.
  7. That said, the incentive has been extended to medium sized business with group turnover up to $50,000,000.

We will list other considerations in our upcoming Parts 2 and 3.  In the meantime, please contact us if you have any questions.

 

Single Touch Payroll webinar

Are you wondering what you should be doing in preparation of Single Touch Payroll?

Do you know that from 1st July all employers in the country are required to report how much every employee will be paid, the PAYG WH tax thereon as well as what their super will be at the time of payment?  And yes whilst there are exemptions it just means more work later.

You need to be ready for Single Touch Payroll now or in the process of getting ready.

So do you know what you need to do before 1st July?

So do you know what you should be doing from 1st July?

If you can’t answer these questions then you need to attend out STP webinar on Tuesday 28th May at 5pm.

You can enrol by clicking on the following link:-

https://zoom.us/webinar/register/a10dbea62247ddf5d746f627e8486654

 

A lesson in tax planning

The 2019 Federal Election certainly proved to be a surprise.

It seems the Coalition is headed for a majority in the House of Representatives. The Senate, whilst heading towards again being hung, may have enough independents to vote with the Coalition on most legislation.  So Labor’s tax policies as presented for the 2019 Federal Election will never see the light of day.

This all proved to be a classic lesson in tax planning.

In my mind, there are three golden rules of tax planning:-

  1. Never assume legislation will be passed,
  2. Never assume legislated passed matches wat was proposed in the first place, and
  3. If you decide to go down a particular path, make sure the payoff is relatively quick.

I spoke with one fund manager late last week who noted that they were having incredibly high inflows into portfolios low on or without franking credits. I wonder how quickly those same investors may now pull out.  Bu extension, I also wonder how cashed up the fund may stay to accommodate what could be an equally high level of withdrawals.

Upcoming March quarter deadlines

For those of you who are employers, Friday 26th April is the end date for satisfying your SG super obligation for the March quarter.  Late payments will attract interest and penalties.  As such, this obligation is an employer’s most important commitment so best not to leave it until the last minute; particularly as payments through some super clearing houses take 5 days or more to clear.

For those who lodge a paper (non-electronic) quarterly BAS or IAS, your March quarter activity statement is due to be lodged by Monday 29th April.

Personal services entities

If you have a personal services entity (you will know if this relates to you as we will have discussed this with you many times over the years), your entity will be required to pay at least 80% of its income to you as salary/wage and remit the tax thereon within this BAS.

Lodgement tip

Please note that lodgement of an activity statement (even if it is nil statement) and payment are two separate requirements. Late lodgement attracts a minimum non-deductible fine of $210 for every 28 days that a form is lodged late whereas as late payment results in an interest levy. More importantly, BAS’s and SG super which is not reported and remains unpaid after 3 months becomes a personal debt of directors (please refer to the September 2012 edition of Tips and Traps for further details on the Directors Penalty Notices system) – and the ATO are actively issuing DPN notices.  That said, the ATO are agreeable to entering into payment arrangements.

STP reminder

And a quick reminder about Single Touch Payroll (STP). STP will be mandatory for all employers from July 2019.  You will shortly receive an introductory letter which will be followed by a series or reminders and steps to be implemented before 30th June.

 

$30000 instant asset write off trap

There are a few traps with the $30000 instant asset write off trap to be wary of.

To qualify you need not only to buy the asset but have it installed ready for use before 1st July 2019.

And please note that this increased threshold only applies to asset acquired after Budget night (2nd April).

$30000 asset limit

The Senate has already passed the bill that allows a small business to fully deduct assets costing less than $30,000 (excluding GST).

However it only applies to assets bought after Budget night (2nd April).

From 1st July 2018, the ex GST limit was $20,000.  In case you missed it, the limit was increased to $25,000 for any assets bought on or after 29th January 2019 (and which applies to assets bought before 2nd April 2019.

The $30,000 is generous. It brings a number of quality new cars and second hand cars into the fold.

And even though the expenditure will match the cash flow, please understand that the tax saved is only a percentage of the outgoing cash.

Want to know how your cash flow will be impacted?  Ask us.  We can show our or cloud accounting clients what the real impact will be on their cash flow.

A Budget warning

A Budget warning!  A Federal Budget is only a series of announcements. No announcement has effect until it is legislated.  For that to happen, a bill must be passed by The House of Representatives before being passed by the Senate.  From there it is effectively a formality for abill to receive Royal Assent.

That all said, the increased instant asset write-off of $30,000 has passed the Senate.

With an election pending, other announcements may never see the light of the day.  Many announcements morph into quite different legislation.

Keep an eye on our posts to find out what is eventually becomes law and how you will benefit or be affected.

$30,000 instant asset write-off

It was announced in the Federal Budget on Tuesday night that the instant asset write-off threshold would be increased to $30,000.

Well the $30,000 instant asset write-off has already passed both houses of Parliament.  It now just awaits royal asset (which is a formality).

Please note that this limit only applies to assets bought AFTER 2nd April 2019.

Keep you eye out for more upcoming tips and traps about this valuable tax saving concession.

Don’t jump too early?

So we have a Budget being delivered (one month early) tomorrow night. And we have a Federal Election due next month.

It seems as though we will have a change of government. One would therefore tend to pay more attention to Labour’s announcements than those from the Coalition.  It also could be that Labour have a majority in both houses or at least a favourable Senate.

But don’t jump too early.

I have lost count of the number of times bills put forward by both parties have never been passed or are greatly watered down from the original announcement. And many times I have seen people incur transaction costs or trigger tax liabilities in anticipation of something that never saw the light of day.

Please return to this web page to view Tips and Traps on changes as they become concrete.