The Top six questions that I receive from business owners in the lead up to 30 June Tax Year End – Question #1

Top Tax Question #1 – Will I get a $20,000 refund if I buy an asset for my business?

Short answer: No

Detailed answer: The ATO allows small businesses to claim an immediate depreciation deduction for assets which cost no more than $20,000 (net of GST). Your business must qualify as a small business entity, that is one with an aggregated turnover over less than $2 million. Assets must be paid for and ready for use by 30 June. You can purchase numerous assets at or below the $20,000 threshold. Of course, the assets must be assets used solely for the business. Having qualified for this depreciation deduction, your will reduce your taxable income by the cost of the asset and therefore reduce your tax by the relevant income tax % you are liable for. In other words, if you are a small business for income tax purposes, you will now pay 27.5% company tax on your taxable income, therefore if you purchase and pay $20,000 for a business asset, you will reduce your income tax payable by $5,500. Not $20,000, but still, a deduction not to be sneezed at.

If you would like further clarification or have any other questions, please do not hesitate to ask us.

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Tony Dimitriadis