Cash flow is the lifeblood of any small business. Whilst we spend and work hard on generating revenue every month to boost the bottom line, one of the easiest things we can do as a small business is to maximise the tax deductions available to us at the end of financial year. Remember, the higher the deductions, the less tax payable. Here we are going to highlight 3 tips for maximising asset-related tax deductions for small business through depreciation and instant asset write-off.
So often we see small businesses that have been operating for years with an out of date depreciation schedule, or sometimes with no depreciation schedule at all. A depreciation schedule reports the deductions available each year for the depreciation of any building works, business fit-out and included business assets.
Sometimes businesses are using an inventory list they inherited from a previous owner. This is not ideal as the previous owner will have already depreciated the assets as aggressively as possible before sale. In this case, businesses should have a quantity surveyor complete a new and up to date depreciation schedule with new effective lives and asset values to maximise the depreciation still available.
Some businesses rely on their accountant to ensure depreciation is accounted for, however accountants are not qualified to estimate construction costs or assign new effective lives and values to second-hand plant and equipment items. Without an up to date depreciation schedule prepared by a quantity surveyor, deductions for depreciation will not be maximised for the small business owner.
Construction and assets for small businesses can be very different to those we see in residential homes, and for the best results we recommend using a depreciation specialist.
Not all quantity surveyors are depreciation specialists. Depreciation specialists must also be registered tax agents with the Tax Practitioners Board. A specialist will be able to more accurately value assets, assign effective lives, utilise low cost and low value pooling and immediate write-off provisions to more aggressively claim. All of this can make thousands of dollars difference to the deductions reported at the end of financial year.
The federal government recently announced an increase in the threshold for the cost of small business assets eligible for immediate tax write-off. The previous limit of $30,000 has now been increased to $150,000. In real terms, this means commercial vehicles that were once purchased over $30,000 would have to be written off over a number of years using depreciation. Now, a business purchasing a commercial vehicle of up to $150,000 can deduct the full cost of that commercial vehicle in the financial year it was purchased.
Another big change to the program is the increase in the turnover threshold, so businesses with sales of up to $500 million now qualify for the deduction, too, with the new rules in place from now until June 30, 2020.
Small businesses work hard all year to maximise revenue and keep expenses down. Failing to maximise the deductions available for depreciation and asset write-off just leaves money on the table for the ATO, straight from the pockets of our small businesses.
If you are unsure about the quality or currency of your commercial depreciation schedule, or you don't have a depreciation schedule at all, please contact our expert team regarding your small business asset write off. Our team will happily answer any questions you may have about small business depreciation and provide guidance and advice in all areas of commercial depreciation.
Contact our team to speak with our small business tax deduction specialists today on 1300 922 220. Or send an email to Alex Konjarski at email@example.com (you can also find Alex on LinkedIn here). Or receive a personalised commercial building quote here.
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Mark is an expert quantity surveyor, business owner, public speaker and property developer. With 20+ years experience in the construction and quantity surveying industry Mark’s specialist expertise have been sought in consultant capacity by professional bodies such as the National Institute of Accountants and the National Tax and Accountants Association, and he has presented at various property and tax seminars and expos nationwide. Mark holds a Bachelor of Construction Management from the University of Newcastle, is an affiliate member of the Australian Institute of Quantity Surveyors and a Registered Tax Agent.View all posts by Mark Wilkins