As the daylight dawned on New Year’s Day, 2020 Stacey was excited about her new resolution. For years, she had been working for a company, but this year she decided to take the reins and build her online clothing store.

She, like many other business owners at the start planned to commence her operations with as little overhead costs as possible, in an effort to break even or even, hopefully, make some profit.

She started to sell her line of clothes, and just as she was making some money the bug hit. A surprising thing occurred however, instead of her sales decreasing they increased! People were stuck at home, retails shops were shutting and her business was growing. So much so, that she not only had to hire an assistant to help with packages – but she also needed to additional equipment to process the orders. Soon, Stacey’s garage workshop grew to a multi staff business, with several computers, printers, packaging supplies and ink. She quickly spent over 15k in the purchase of these assets.

While Stacey was aware she would be eligible to claim working from home-related expenses such as business-related portions of rent, internet, utilities and phone bills, he had not heard of the Federal Government’s changes to the instant asset write-off scheme.

Here is a quick rundown on the instant asset write-off, and whether it is something, you can consider for purchases made before EOFY:

What is an Instant asset write-off? It allows small businesses (with an annual turnover of less than $500 million) to claim immediate deductions for new or second-hand plant and equipment asset purchases. The assets must first be used, or installed for use, in the income year you are claiming for.

How does it work? If you buy an asset that comes under the threshold, you can claim the business portion of the asset’s use in your tax return for that financial year. You can claim a deduction for multiple assets as long as the cost of each individual asset is less than the threshold.

What items can you claim? Some of the items that you could look at claiming would need to have been purchased before June 30, 2020 and include vehicles, fittings and fixtures, computers and laptops, and security systems.

When will the instant asset write-off offer expire? This originally applied until June 30, 2020 for new or second-hand assets first used or installed ready for use in this timeframe. However, on June 9, 2020, the government announced it will extend the $150,000 instant asset write-off until December 31, 2020. This proposed change is subject to the parliamentary process and is not yet law.

 

CAAA Commercial Concierge specialise in SME taxation advice. If you are ready to lodge your business tax return or would like some advice on what you can claim, speak to your concierge today.

 

*The above case study is fictional, for illustrative purposes only.

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