Small Business Asset Write-Off to be Scrapped
written by Darren Hagarty
For some time now, small businesses (broadly defined as those businesses with turnover less than $2 million) have enjoyed two instant tax write-offs:
1. assets costing $6,500 or less;
2. the first $5,000 of a motor vehicle.
Unfortunately, legislation before Parliament at the moment is proposing to put a stop to this.
The legislation is proposing a return to the former rules, which will effectively limit an outright deduction to items costing $1,000 or less. Assets over this amount will have to be written-off over a longer period (i.e. using the depreciation rules). This means a longer payback period for the tax benefit.
The start date for these changes has just been announced as 1 January 2014.
At the time of writing, there were only weeks remaining in the Parliamentary year and therefore limited opportunity to pass the legislation containing the repeal of these measures, particularly in view of a potentially hostile Senate. However, it’s important to note that even where these laws are not passed by 1 January 2014, when passed (either by the current Senate or the new Senate which sits after 1 July 2014), the laws are expected to be backdated to apply from the above dates.
If you are contemplating low cost equipment or vehicle purchases, you may wish to bring forward your purchase before this date. The asset must be installed and ready for use by 31 December 2013.
Darren Hagarty is a Director of PT Partners.