Update 9 June 2020 – The Federal Government announced today they will be extending the $150k threshold. The announcement still needs to pass parliament, so watch this space as to whether it becomes law or otherwise. Regardless, the 30 June deadline still applies to your 2020 tax planning. Read on…
Tax Planning 2020 – The New and Improved (though temporary) Instant Asset Write-off
2020 presents a once in a lifetime tax planning opportunity which, if missed, could see your business struggle to recover from its pandemic induced doldrums for years to come.
We know many small business owners are tired of hearing accountants promote the virtues of year end tax planning.
But the fact is the very best business operators who have a good accountant see their year end tax planning meeting as one of their most important of the year.
Not only is it the final chance to ensure they are paying the absolute minimum tax legally possible, but it also provides the opportunity to forecast tax outgoings for the next twelve months and therefore plan and manage upcoming cash flow requirements.
So if you have ever dismissed year end tax planning, 2020 is the year to seriously reconsider.
Instant Asset Write-Off New Threshold
This is in no small part because of the changes to the Instant Asset Write-Off rules implemented in order to help boost the Australian economy in response to the COVID-19 pandemic.
This measure has largely been ignored up till now, because it didn’t provide an immediate cash boost to business owners (unlike the Cash Flow Boost for Employers and the JobKeeper Payments which did).
However, the changes to the Instant Asset Write-Off rules could be a very welcome additional tax effective stimulus for your business.
In short, you have until 30 June (so just a few weeks at the time of writing) to qualify for an instant write-off of business assets purchased up to the eye watering value of $150,000!
Now we know we consistently promote careful cash management and the continual reinvestment back into your business to build and maintain cash reserves.
Therefore we tread carefully when raising the possibility of utilising the new and improved (and temporary) Instant Asset Write-Off threshold.
But, if your business could genuinely benefit from a new piece of equipment, that it can genuinely afford and that you were otherwise contemplating purchasing now or sometime in the foreseeable future, then don’t put it off any longer.
Being able to deduct the full purchase price this year, saving you potentially as much as $70,500 at tax time, while enjoying the business benefits of the new asset, is a once in a lifetime opportunity.
There is another way to access the benefits of the temporary rule change
But the best thing is, spending is not the only way to save substantially on your 2020 tax bill under these temporary provisions…
Because what is so often overlooked and forgotten about by many is that if your Small Business General Pool balance as at 30 June is below the Instant Asset Write-Off threshold then you can deduct the entire pool balance this year!
In previous years that meant your pool balance would have to be below $20,000 or $30,000 depending on the applicable threshold for the year. But in 2020 it means so long as your pool balance is below $150,000, you will get to claim the full amount against your 2020 income tax, without the need to outlay any further cash on purchasing new equipment.
For some businesses this bonus tax deduction will make a world of difference to their 2020 tax bill and will allow them to reinvest and to reposition their business ready for future upheavals and most importantly future opportunities.
Here’s how we at CapitalQ are using this one off opportunity
- New Team Vehicle (Brand new Mitsubishi Triton Dual Cab Ute) – $40,000 (Drive Away)
- Full vehicle wrap in bold CapitalQ branding including design and installation – $5,775
- Less: GST Input tax Credits Claimed – $4,161
- Total Immediate Income Tax Deduction per Vehicle – $41,614
- Return on investment (Team member loyalty, branding and awareness) – $Priceless
If you want to secure a similar deal, lock in a tax deduction AND substantially increase your businesses branding and awareness, contact us today and we will show you how with the help of our partners Stormbox and Fleet 1st Automotive?