Businesses have a few weeks left to buy and install assets worth up to $6500 to take advantage of the instant asset write-off provisions to be stricken from the tax law from January 1.
The small business concession, which applies to businesses making less than $2 million in revenue, will only apply to assets installed and ready for use before January 1.
It allows businesses to immediately write off the maximum deduction for assets worth less than $6500. From January 1, the threshold will drop to $1000, with assets worth more than that being deductable over two to three years.
Tony Greco, the general manager of technical policy at the Institute of Public Accounts, says if businesses have a shopping list of things they need to buy, it’d be well worth getting them delivered before Christmas.
“For a small business, cash is vital, and the quicker you can get your hands on that deduction, the better for your cash flow.
“We’re not saying go out and spend recklessly. But if you have things on your shopping list worth less than $6500 each, it’d make sense to go out and buy them before January 1.”
The write-off applies per asset, rather than as a total. “So you could buy five very expensive office chairs for $2500 each and get the write-off,” Greco says.
Tax changes normally take effect in the new financial year. This change, linked to the passing of the mining tax repeal bill, is different, taking effect from January 1.
Because of this, the Institute of Public Accountants fears many SMEs may have missed the change.
“It’s unfortunate timing, which Christmas and all,” Greco says.
“It will catch some people out. You usually don’t talk to your accountant until the end of the financial year.”
The bill has yet to be introduced into parliament. While it’s expected to pass the lower house quickly, it may be held up in the Senate, where the government does not hold the balance of power.
“It’s still got to go through Parliament, so who’s to say they won’t adjust a few things,” Greco says. “But it’ll be a surprise to us if this doesn’t go ahead.
“If you really want to bank on the write-off, the safest thing is to buy before January 1. Put it on credit if you have to, and as long as it’s installed and ready for use before 2014, you’ll meet the criteria.”