Small Business Tax Concessions

Written on the 31 January 2013 by Macmillans Waller Fry

With the 2012-2013 financial year end only months away, now is a good time to plan ahead and take advantage of the small business tax offsets.

The tax concessions, announced by the Government in last years Federal Budget, may increase the depreciation deduction for small businesses, which in turn may reduce the taxable income in a high profit year. There are three primary changes that small businesses will benefit from. Firstly, is the increase to the small business instant asset write-off. From the 2012-2013 income year, small businesses can immediately claim an outright deduction for most depreciating assets purchased for less than $6,500 each, which is an increase from the previous amount of $1,000.

For example, a business that buys 3 pieces of equipment at $6,000 each will get a tax deduction of $18,000 in the first year. Furthermore, sole traders who are on a higher marginal tax rate may receive a bigger tax saving. Apart from the immediate financial benefits from the changes, the measures also mean less red tape for small business owners who have had to monitor the depreciation of their assets over several years.

The second change is to the pooling system, under which small businesses making purchases over the $6,500 limit, can allocate the depreciating assets to the general small business pool which is depreciated at 15 per cent in the year of allocation and 30 per cent in other years irrespective of the assets effective life. Previously, companies had to allocate depreciating assets either to the long-life small business pool or general small business pool depending on the assets effective life. 

Vehicles should also be evaluated.

Small businesses that buy a motor vehicle for use in their business can claim an immediate deduction of up to $5,000. This will come as a great relief for many small business owners whose business relies on the use of vehicles. The remainder of the vehicle’s cost will be deducted through the general business pool at 15 per cent for the first year and 30 per cent for later years.

Small businesses should look into how they can reap the full benefits of these concessions before the financial year is over.

Author: Macmillans Waller Fry




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