Will The $20,000 Write-off Work For You?

by | Jun 3, 2015

If you don’t really focus on the tax and bookkeeping end of your business, you might not be aware of a proposal that will allow small business owners to take an immediate tax deduction of $20,000 for most of their capital purchases. This is in stark contrast to the $1,000 limit for last year, which was a reduction from the prior $6,500 limit.

Currently, the $20,000 write-off is only a proposal in the 2015-16 Federal Budget, and it will still need to be voted on and passed in the Senate to go through. While some details remain unclear, it is expected to pass quickly and be available immediately and run through June 30, 2017.

Currently, the deduction would apply to assets that are new or second hand, and can also be applied on a per asset basis. This means that you could conceivably have more than one asset that costs up to $20,000 to qualify for the write-off as long as they are installed and ready to use before June 30, 2017.

Assets that cost $20,000 and over can still be depreciated at 15% in the first year and 30% each succeeding year using the small business simplified depreciation pool.

What the write-off means for you

What this means for small business owners is that not only will you be able to depreciate capital items on your taxes more quickly, you should also receive a healthy injection to your cash flow in the form of a lower tax bill.

While you wouldn’t want to go out and make a large investment just to be spending the money, if you’ve been putting off some much needed upgrades, this write off might be just the incentive that you need to follow through and make those purchases that will help you upgrade and improve the service you offer your clients.

Exceptions to keep in mind if you plan to claim the write off

Of course, there really isn’t such a thing as “free money”, or a “free lunch”, and these old axioms certainly apply to this $20,000 as there are some exceptions to being able to take the write-off. The most important one being that you must be operating as an actual small business to qualify for the write-off. It’s not enough to have a current ABN, you will need to show that you are an ongoing concern and operating as a small business to take the deduction. According to the Australian Tax Office (ATO), most small businesses that earn less than an aggregate of $2 million per year can be officially classified as a small business entity, and you can use your figures from last year to determine your classification.

Since you must be able to prove that you are an actual ongoing business, you might also have difficulty deducting certain business losses after you take the write-off.

You will also want to take into consideration whether or not you have an actual place of business or if your home office is merely for convenience if you plan on taking advantage of the write-off. The usual rules will apply when it comes to apportioning the costs between personal and business use for your business location.

Keeping up with the paperwork

Make certain to get and keep your receipts for any capital purchases that you do make, whether or not you plan to claim the $20,000 write off. While almost any asset up to $20,000 can be claimed on the write off, there are some exclusions. These exclusions include purchases for horticultural plants, software and other similar assets that are allocated to a special low depreciation pool, capital works that are subject to their own special depreciation rates, assets that are leased to others on a depreciating lease, and primary production assets since they can be depreciated using UCA rules or accelerated depreciation.

Keeping all of the exceptions and exclusions in mind can be a bit difficult when taxes and books aren’t the main focus of your business, so if you would like more information about the write off and its potential implications for your business, don’t forget to get in touch with us. We’re here to help you make the best decisions for you and your business!

What investments will you make?

Now that you know a bit more about the upcoming $20,000 write off, do you plan to take advantage of this opportunity to reduce your taxes and increase your cash flow by making an investment in your business? If so, you are certainly not alone in this decision! According to a recent survey in the online publication Smart Company, nearly 75% of all small business owners plan on taking the $20,000 write off, with most planning on using the deduction to purchase an upgraded computer system or vehicle for their business.

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I have had many a chat with Sophie on the networking circuit. Sophie has a strong profile and reputation within business circles and I wouldn’t hesitate to recommend her to any soho needing direction, support and encouragement. I have a passion for educating small business myself and wholeheartedly support Sophie in her endeavour to actively reduce costs for those who may be unintentionally making uninformed decisions relating to business management. Many business owners are unnecessarily outsourcing tasks which are misdirected or can be achieved inhouse.

Gai Hook
Virtual Sales Strategy

2017-10-13T09:32:05+00:00

Gai Hook
Virtual Sales Strategy

I have had many a chat with Sophie on the networking circuit. Sophie has a strong profile and reputation within business circles and I wouldn’t hesitate to recommend her to any soho needing direction, support and encouragement. I have a passion for educating small business myself and wholeheartedly support Sophie in her endeavour to actively reduce costs for those who may be unintentionally making uninformed decisions relating to business management. Many business owners are unnecessarily outsourcing tasks which are misdirected or can be achieved inhouse.
I’ve worked with Sophie as a contributor to Confessions of a Mumpreneur – a fantastic book that she dreamt up, edited and produced. Apart from producing fabulous books that help so many others realise their entrepreneurial dreams, Sophie is an astute business person who is making her mark on her own terms. Watch this space – I’m sure we’ll see and hear a lot more from Sophie Andrews in the years to come.

Jennifer Dalitz
Gender Diversity expert, Career Coach, Award winning blogger on women, work & leadership @ www.TheSheEOBlog.com

2017-10-13T09:50:01+00:00

Jennifer Dalitz
Gender Diversity expert, Career Coach, Award winning blogger on women, work & leadership @ www.TheSheEOBlog.com

I’ve worked with Sophie as a contributor to Confessions of a Mumpreneur – a fantastic book that she dreamt up, edited and produced. Apart from producing fabulous books that help so many others realise their entrepreneurial dreams, Sophie is an astute business person who is making her mark on her own terms. Watch this space – I’m sure we’ll see and hear a lot more from Sophie Andrews in the years to come.
I got to know Sophie through my previous employer where Sophie still handles the bookkeeping side of things. While we worked together I have found Sophie very accurate, punctual and very pleasant to work with. And recommend her highly.

Dianna Holwerda
Client Service Manager, John Sergeant Associates Pty Ltd

2017-10-13T09:55:05+00:00

Dianna Holwerda
Client Service Manager, John Sergeant Associates Pty Ltd

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I was recommended to The Accounts Studio at a networking event and have been working with them for the last 2 years. The team have all been very approachable and available – two things essential when it comes to understanding your accounts! I now no longer have the stress every three months of getting my BAS correct and even better I have a clear understanding of where my company is financially! Thanks Sophie and TAS team!

Eleni Mitakos
Galmatic Pty Ltd

2017-10-13T04:16:02+00:00

Eleni Mitakos
Galmatic Pty Ltd

I was recommended to The Accounts Studio at a networking event and have been working with them for the last 2 years. The team have all been very approachable and available – two things essential when it comes to understanding your accounts! I now no longer have the stress every three months of getting my BAS correct and even better I have a clear understanding of where my company is financially! Thanks Sophie and TAS team!
I have really enjoyed working with you guys and look forward to a successful 2013. From the moment we started with TAS I have seen value. The figures are accurate, you are accessible (and approachable!) and most of all – you are cool people!

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Chris Du Plessis
Managing Director, Origin Meat Pty Ltd

I have really enjoyed working with you guys and look forward to a successful 2013. From the moment we started with TAS I have seen value. The figures are accurate, you are accessible (and approachable!) and most of all – you are cool people!
"Sophie is so professional – careful, attentive and punctual – she has made managing my accounts not just easier, but a whole lot less stressful"

Fast Ed
TV Chef from Better Homes & Gardens

2017-10-13T04:23:15+00:00

Fast Ed
TV Chef from Better Homes & Gardens

"Sophie is so professional – careful, attentive and punctual – she has made managing my accounts not just easier, but a whole lot less stressful"
Sophie has been a tremendous support and guiding light for my business. I have continually succeeded when acting on her advice and by using her services. Her products are fantastic and her ideas and accuracy is out of this world. I would never hesitate to recommend Sophie’s services and I would invite anyone to contact me for a referral.

Belinda Grundy
GM, Property Styling Online and BG Property Styling

2017-10-13T09:21:50+00:00

Belinda Grundy
GM, Property Styling Online and BG Property Styling

Sophie has been a tremendous support and guiding light for my business. I have continually succeeded when acting on her advice and by using her services. Her products are fantastic and her ideas and accuracy is out of this world. I would never hesitate to recommend Sophie’s services and I would invite anyone to contact me for a referral.
Sophie has the spirit of the Entrepreneurial Business Owner! Whether she is running a successful single family website, creating a product for small business owners or running her own bookkeeping agency she is always right on track as to what small business needs. If you want to speak to someone who not only knows what business owners are going through-she also does something about it- then don’t miss out, connect with Sophie! She is someone who can not only think outside the square- she has true strategic thinking; which is often spoken about but is rarely truly placed into action.

Sue Heins
Councillor at Warringah Council

2017-10-13T09:25:16+00:00

Sue Heins
Councillor at Warringah Council

Sophie has the spirit of the Entrepreneurial Business Owner! Whether she is running a successful single family website, creating a product for small business owners or running her own bookkeeping agency she is always right on track as to what small business needs. If you want to speak to someone who not only knows what business owners are going through-she also does something about it- then don’t miss out, connect with Sophie! She is someone who can not only think outside the square- she has true strategic thinking; which is often spoken about but is rarely truly placed into action.
Sophie is an amazing business woman. She is able to take the complexities of business and break them into manageable pieces for small and home based business owners to work with. She’s clever, creative, supportive and very generous. She’s the reason that so many small businesses are doing so well. If yours is a small or home based business then Sophie is someone you need to know.

Anne Maybus
Writer and Content Creator, Clever Streak

2017-10-13T09:26:35+00:00

Anne Maybus
Writer and Content Creator, Clever Streak

Sophie is an amazing business woman. She is able to take the complexities of business and break them into manageable pieces for small and home based business owners to work with. She’s clever, creative, supportive and very generous. She’s the reason that so many small businesses are doing so well. If yours is a small or home based business then Sophie is someone you need to know.
Sophie is efficient, direct and gets the job done. She responds quickly, keeps me updated and has a way of simplifying things and making my life easier. She is all about efficiency and that’s what makes it great to work with her, I highly recommend her to anyone who wants someone to efficiently look after their books and she is great value for money too.

Adam Dobson
Strategic Resourcing Manager

2017-10-13T09:28:24+00:00

Adam Dobson
Strategic Resourcing Manager

Sophie is efficient, direct and gets the job done. She responds quickly, keeps me updated and has a way of simplifying things and making my life easier. She is all about efficiency and that’s what makes it great to work with her, I highly recommend her to anyone who wants someone to efficiently look after their books and she is great value for money too.