Published on 14/12/2015 by Punchmedia

Why Business Owners Must Plan for Instant Tax Depreciation

Business owners are being urged to plan for a tax regime that now includes a $20,000 instant asset depreciation. The government introduced an instant tax deduction on up to $20,000 of capital items, in the May budget, increasing the deduction from its previous level of $1000. The announcement gave business owners a few weeks of trading to make their instant-deduction purchase, before the end of the financial year. According to tax experts business owners have to integrate the new rules into their cash flow and tax planning as soon as possible. Experts believe the instant deduction confused some business owners, who saw the retailers' advertising and assumed there was $20,000 up for grabs. The instant deduction meant a business owner could claim the full amount of a capital purchase up to $20,000 – in one go as a tax deduction – rather than depreciate it with a schedule and only claim a partial deduction over four or five years. Tax experts have since explained that the benefit available to a business fell somewhere between $6000 and $8000 dependant on individual tax rates - companies would only ever have a benefit of 30 per cent, whereas individuals might have a higher tax rate. They say the real benefit of the instant deduction was a combination of tax advantage alongside cash flow management with the immediacy of the deduction relative to the expense. With the 2014-15 financial year finalised, now is the time business owners can now build the deduction into their planning. Experts have warned that as business owners plan for this year, that the instant deduction does not apply to horticultural plants or capital works such as construction. Business owners should consult their accountants rather than making assumptions. Business owners need to know exactly what the tax benefit is if they are using the rule changes to make a purchase decision.

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Curtis is a leading expert in the business-for-sale industry, serving as a senior content creator at anybusiness.com.au.

With a career spanning over fifteen years, Curtis has accumulated extensive knowledge in the domain of business sales, acquisitions, and valuations. His deep understanding of market dynamics and his ability to translate complex industry jargon into accessible insights make him a trusted resource for entrepreneurs and business owners looking to buy or sell businesses.

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