Time Running Out For Small Business Budget Measures
The accelerated depreciation Small Business Budget Measures are finishing on 30 June 2017
Back in May 2015, The Honourable J.B. Hockey MP unveiled the Federal Budget, announcing the Small Business package designed to energise the sector.
Most notably, the Accelerated Depreciation measure allowed any eligible small business to claim an immediate tax deduction for each and every item they purchase up to $20,000 before 1 July 2017.
Eligible assets include cars, vans, solar panels, machinery, printers, IT equipment, point-of-sale systems, specialist equipment and many more. And it applies to new and old assets. In fact there is only a small list of excluded assets.
To demonstrate how this measure can be used by a small business with an annual turnover of less than $2million, the government has provided a case study as follows:
Small business with annual turnover of less than $2 million
Small business with annual turnover of less than $2 million Sam owns and operates a small bakery, which he runs as a company in a country town in north Queensland.
Sam purchases a new rack oven for $13,750 and a new proofing cabinet for $3,500 to replace his old, worn-out equipment.
Because these assets each exceed the current $1,000 threshold, they would be included in the accelerated depreciation 'pool'. Of their combined $17,250 cost, only 15 per cent, or $2,588, would be depreciated in the first year. With a company tax rate of 30 per cent, this means that Sam's company would only get $776 back on its tax in the first year.
Under the new $20,000 threshold, Sam's company will be able to claim an immediate deduction for both the new rack oven and the new proofing cabinet, giving an immediate deduction of $17,250. With the new small business company tax rate of 28.5 per cent from 1 July 2015, Sam's company will get $4,916 back on its tax.
Under the new $20,000 threshold for accelerated depreciation, Sam's company will receive an additional cash flow benefit of $4,140.
Previous Law New Law Additional Benefits Depreciation deduction $2,588 $17,250 $14,662 Cash Flow Benefit* +$776 +$4,916 +$4,140
*cash flow benefit equals depreciation times the tax rate. Sam also benefits from the reduction in the tax rate for small companies, from 30 per cent under the current law to 28.5 per cent under the new law.
Time running out
This budget measure ends on 30 June 2017.
If you need business equipment, act now.
Businesses requiring capital or finance can speak to the Classic Funding Group team, who may be able to assist either by financing the equipment on a Secured Loan or by raising the required funds through Sale-Back finance.
On a Secured Loan Agreement, the business takes ownership of the asset from the outset and the financier takes a mortgage over the asset.
Alternatively, the business might have other unencumbered assets that they can sell and lease back or offer as security to release capital.
Contact the business solutions team to discuss your requirements on 1300 780 895.
We do not provide financial advice. You should obtain your own financial advice on the tax and accounting treatment of any finance solution you choose.