The $20K Small Business Tax write-off Continues for One More Year
The most famous tax breaks continue for the small business owners. The tax deduction plan offered $20,000 instant asset write-off to the small business owners. It was first introduced on the Budget night in 2015. Since its introduction, it has generated plenty of extra purchases like tools and machinery, computers, air conditioners and cars.
According to the Treasurer, Scott Morrison this scheme will last for another 12 months. It was stated in the Budget that the Government has extended the tax deduction. The scheme will be available for small business owners until 30 June 2018. He also mentioned that the turnover threshold has been raised to $10 million. This amount is 5 times higher than the original amount.
Mr. Morrison said that it will lead to improvement in the cash flow of the small businesses. It will be boosting the activities of the small businesses for one more year. Apart from this, it will help them to reinvest in their business and upgrade their assets. The betterment in the cash flow allows the business to hire more employees. They will be capable of paying more to the staff.
All the small businesses, from farmers to accountants advised continuing the deduction scheme. Most of the businesses recommended that this plan should be made permanent. This will give the businesses more certainty and enable them to make plans for future purchases. Some of the business has demanded to increase the amount to $30,000.
According to the Treasury data, in the first 6 months of their operations, 100,000 businesses made claims. The total claimed amount by the small businesses was $418.5 million between July and December in 2015. During the same period in the previous year, the amount was $250 million.
Mr. Morrison revealed that the tax deduction has been well received by the small businesses. This has increased the claims of depreciation deductions. He said that the Australian small businesses are investing in the assets that will contribute to their growth. He believes that the small businesses must be supported so they can grow and invest.
A depreciating asset is an asset that has a fixed lifespan. With the passage of time, the value of the asset is expected to decrease. So any depreciating asset that is worth $20,000 is qualified for the deduction. Previously, the assets over $1,000 were to be depreciated over the years after the purchase. But the recent scheme offers the whole tax break up front. It will result in better cash flow for the small business owners.
Nonetheless, the owners have to keep in mind that is scheme is not a grant by the government. The small businesses must make profit to get the benefit of the tax deduction.
Therefore, when this plan was introduced, the tax rate for small businesses was 30%. Currently, the company tax rate is 27.5% for the turnover up to $10 million. In simple words, this means that the size of the tax deduction is also less.