Question #1: Will I get a $20,000 refund if I buy an asset from my business?

 

Hi, my name is Tony Dimitriadis. I run an accounting & advisory firm and I specialize in helping ambitious builders and property developers build a financially rewarding tax-efficient lifestyle business. The number one question I get
asked in the lead up to 30 June is, “Will I get a $20,000 refund if I buy an asset from my business?”

Well, the short answer is no. The more detailed answer is that the HR allows small businesses to claim an immediate depreciation deduction for assets which cost no more than 20,000. That 20,000 has actually recently been extended to 30,000 from April 2019. So firstly, you need to qualify as a small business. The small business annual turnover threshold has now also been pushed out to 50 million. So that’s gonna capture quite a number of small businesses out there. So chances are, you will qualify on that basis.

But do you get the 20 and now $30,000 tax refund? No, you get the deduction so you claim that cost against the income you make, therefore reducing your taxable income by that amount — let’s stick with the 20,000 from now. So at a company tax rate of twenty-seven and a half percent, you’ll claim the twenty thousand as a tax deduction and then you’ll get a tax refund of five and a half thousand in that example. Now, of course, you need to have made a net profit to be paying tax in the first instance, but obviously, you’d save five and a half thousand in tax for a twenty thousand dollar purchase.

Now, don’t go running out and buying an asset just because you get a five and a half thousand dollar tax refund. Buy the asset because you need it for your business and it’s gonna help your business grow. Don’t spend money for the sake of spending money or for the sake of a tax refund. Spend it wisely on the things you need to help your
business.

Hope you found this useful, thanks for joining me. Looking forward to speaking with you soon. Bye for now.

Tony Dimitriadis