Budget 2015: $20,000 puny business tax break explained

Puny businesses will benefit from generous tax write-offs in the budget.

One of the largest announcements in last night’s budget was the makeshift increase to the instant asset write-off, permitting petite businesses to claim back purchases of up to $20,000.

So is this just free money? How can you take advantage of the fresh scheme?

Take a look at the key points of the $20,000 instant asset write-off.

Budget two thousand fifteen analysis:

What is the $20,000 tax break?

Businesses with an annual turnover under $Two million can claim instantaneous tax deductions for as many sub-$20,000 purchases as they make inbetween 7:30pm on budget night and June 30, 2017, rather than having to claim those purchases as deductions spread over several years.

This is a large increase from the current instant asset write-off threshold of $1,000.

The Federal Government has allocated $1.75 billion to fund the scheme, which will run for the next two years.

Who is eligible?

The $20,000 tax break applies to businesses that can demonstrate ongoing activity via quarterly Business Activity Statements, Petite Business Minister Bruce Billson said.

The business must be actively trading to be eligible for the break.

What’s covered?

Photo Puny business equipment under $20,000 is fully deductible under the fresh scheme.

“If you run a cafe, it might be fresh kitchen equipment, or fresh tables and chairs,” Mr Hockey said in his budget night speech

“If you’re a tradie, it might be fresh implements or a computer for the home office.

“Cars and vans, kitchens or machinery . anything under $20,000 is instantaneously one hundred per cent tax deductible from tonight.”

In other words, any asset involved in running a business is covered by the scheme.

What’s not?

Assets over $20,000 are not eligible for the instant tax write-off, but can be fully written off over a longer period.

Any assets over $20,000 can be added together and depreciated at the same rate. These assets are depreciated at fifteen per cent in the very first income year, and thirty per cent per year thereafter.

If the value of the pool is below $20,000 until the end of June two thousand seventeen it can be instantaneously deducted too.

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There are a few items not deductible, including some horticultural plants and any software developed in-house by a business.

Software purchased for business use, for example, an account-keeping program, can be claimed.

Accountants have also warned they expect the ATO to closely monitor the number of Australian Business Number (ABN) applications, to keep an eye on any attempt to rort the scheme.

What else do you get?

In addition to the instant asset write-off, companies with annual turnover of less than $Two million will have their tax rate lowered, from thirty per cent to 28.Five per cent.

This is the lowest puny business company tax rate in almost fifty years.

Unincorporated businesses, such as foot traders, partnerships and trusts, will also get a five per cent tax discount from July one up to $1,000 a year.

What does this mean for you?

If you presently run or you are thinking of kicking off a petite business, now is the time to act, according to ABC’s AM program host Michael Brissenden.

“The puny business package is extraordinarily generous. If you were ever thinking about opening a cafe, do it now,” Brissenden wrote last night.

“Buy as many espresso makers, fridges, photocopiers and lawn mowers as you like, and claim an instant tax deduction until 2017.”

However Australia Institute executive director Richard Denniss has warned puny business people to be cautious of taking advantage of the scheme before it passes Parliament — if it does at all.

“The scale and generosity of this proposal is unprecedented and, while the Treasurer has announced that it will begin [on budget night], history suggests he shouldn’t take the Senate for granted,” Mr Denniss said.

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