The 2019 federal budget issued by the government and the budget response from the opposition has been all over the news this week. I won’t go into it in detail as most business owners will have read through the information already.
One of the big-ticket items announced for small business is the $30,000 instant asset write off. This applies for assets purchased and first used or installed ready to use from 3 April 2019 and can be accessed by businesses with turnover up to $50 million. The fine detail of this is that the asset should cost less than $30,000 excluding GST and it can also include second hand assets.
If you do purchase an eligible asset then you can claim the full amount as a tax deduction in the year of purchase. This is compared to spreading the deduction over several years by claiming depreciation. As a result, businesses will pay less tax in the year they purchase the asset however they need to be aware that their taxable income may be higher in following years due to the deductions for assets previously being claimed.
In the position that you do have less tax to pay the cash flow situation may require some thought on what you can do with this saving. If you bought the asset to claim the deduction without any finance then you may have less cash available due to this however you will have less tax to pay. If you purchased the asset using finance then you may have more cash available in the bank however you still have to pay off the loan.
Using the additional funds to pay down the loan quicker is one option available and this will reduce the interest you will pay on the loan. However you should read the terms and conditions of the loan to ensure you can pay the loan off quicker without any penalties.
One other option is you could invest the tax savings into something else to help grow your business – another asset, marketing campaign, additional employees or many other things. However you should seek professional advice before deciding on any of these things.
If you would like more information on this please call UHY Haines Norton on 4972 1300 or email info@uhyhncq.com.au