It's an excellent opportunity now to set your business up for the next couple of years.
The increased investment allowance that’s been offered by the government; increasing the threshold to $150,000 means that you can buy a very substantial amount of assets for your business that you might have desperately been needing but you've been holding off buying. It might have also been something that you know you might have a car that's two or three years old and you were thinking about upgrading it, should you or shouldn't you; the decision is now easier. If you can afford it, if you had the money available or if you can put a deposit down and borrow the rest; and if you have the ability to forecast 6-12 months of income/expenses for your business to know that whatever money that you're spending after that doesnt leave you with a bank account balance of zero. You cant pay staff with tax deductions.
If you're in the lucky position to be able to invest in assets in these depreciating assets for your business then the investment allowance is a really really is an effective way of managing your tax for this year and bringing your tax bill down. It's very generous and it has recently been extended to the 31st of December which means that a few people who may have been thinking about taking advantage of the instant asset write-off but they just couldn't possibly have enough money in this Covid time to buy before 30th June, you’ve now got another 6 months running up until Christmas to go out and take advantage of the opportunity.
Certainly the reasoning behind the investment allowance being out there is sound. The Government wants money floating around the economy they want money circulating.
Without the investment allowance people would be doing exactly what would seem to be the smart thing; they'd be sitting on their cash and holding it for a rainy day not knowing what the future will bring. Imagine every single business out there doing that!
This investment allowance has allowed people to go out and say “Well if I’m going to get a great tax deduction for buying something new then I will go ahead and I'll purchase that asset” and that might be the difference between that salesman who sells you the asset making a commission to feed their family that month and might keep that business going and keep it viable. The investment allowance is incentivising new sales and having money circulating around the economy which I think is so important.
If your business can use the instant asset write-off there's no limit on how many assets you can buy as long as you stay under that $150,000 threshold. You could buy any numbers of items, it could be a truck, van or car ( please note reduced limits apply for passenger cars), a computer, it could be decking out your office, it could be could be any number of items. If you are able to afford to invest in those items then certainly you can set yourself for 2020 Tax and it could be that you could set yourself up for next year's tax too. Provided that you've got the ability to forecast and make sure that you can afford it, it's a great reason now to go ahead buy.
If you’re thing of buying something new in the next 2 years, then buying in the next 6 months will make the most of the incentives are out there at the moment.
One of the things that may not be greatly known out there, but when it comes to claiming depreciation, please speak to your tax advisors about whether or not the current assets that you own are Pooled. Find out whether you're taking advantage of small business rules like using the small Business Investment Pools or Low Value Pools, it's quite a generous tax benefit. If you are a small business and you use pooling for your assets, and if the value of that pool drops below the threshold within the financial year you can deduct the remainder of that pool!
I don't think that every business is even necessarily accessing it, it may not be well known. Certainly for small businesses that could benefit please ask your accountant, ask your bookkeeper whether you're taking advantage of it because implementing accelerated depreciation could be the difference between you having to pay tax this year or not paying tax this year. All legislation and incentives are there for all of us to be able to be managed effectively to get the best results.
The ATO has made it clear they're going to get paid last in the 2020 tax year to help businesses & individuals get through this Covid9 crisis. If it ends up being that you use the laws as intended to end up with no tax to pay this year, the ATO is perfectly ok with that. Do the right thing, however, because the ATO will come down hard on non-compliance.
If you do have assets currently being depreciated, ask your accountant to review them as to whether or not you can get accelerated depreciation on assets that you already own, as well as purchasing something new to set your business up for the future.