It’s nearly the end of the tax year and as the year’s result should now be clear, it’s now appropriate to address tax planning. One of the tax planning tips is to use the $20,000 asset write-off.
So if your business does need a small asset, now is the perfect time to buy it.
But before doing so, please ensure you have factored in the following considerations:-
- 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 $3,000 less company income tax. It will still be $7,000 out of pocket.
- 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 $2,000,000. If not, the $20,000 provisions do not apply.
- 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.
- Leased assets 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.
- If you need to finance an asset purchase, then you need to act quickly, very quickly, as financiers will be inundated.
- To qualify, an asset must be installed or ready for use by 30th June.
We will list other considerations in our upcoming Part 2. In the meantime, please contact us if you have any questions.
At MRS, we will spend today planning for your success tomorrow.
At MRS, we will spend today planning for your success.