If you are a small to medium-sized business owner, you would be forgiven for feeling a little confused about the Government's tax write-off schemes. The rules have changed numerous times over the years - and a new scheme has been announced in the 2023-2024 federal budget papers.
So, should you rush to purchase items for your business before EOFY? It's important to decide now; you only have until 30 June at 7.30pm AEDT to finalise your books!
Let's take a look.
We recently wrote about the Instant Tax Write-Off Scheme, set to end this financial year on 30 June 2023. The scheme, also referred to as Temporary Full Expensing, allowed SMEs to write off assets of up to $150,000 instantly. It was a popular incentive put in place to alleviate pressures placed on businesses due to the COVID-19 pandemic.
Once the scheme ended, it was thought that instant write-offs would only be available for purchases of up to $1,000. Clearly, a huge reduction!
Once again, however, the landscape has changed (and so your choices may too).
As announced in the recent budget, the new tax write-off scheme for the 2023-24 financial year will allow businesses to claim tax breaks on items valued up to $20,000.
The scheme isn't really new. This is what existed in 2015 and prior, before the turbo-charged full expensing option was introduced to assist businesses in harder times.
The new $20,000 Instant Tax Write-Off Scheme
Going forward, SMEs with an aggregated annual turnover of less than $10 million will be able to claim an immediate tax reduction for all eligible capital assets costing less than $20,000.
The scheme gives businesses immediate relief, instead of needing to claim depreciation over several years.
SMEs can immediately deduct the full cost of eligible assets that are installed and ready to use between 1 July 2023 and 30 June 2024.
The threshold applies on a per asset basis, so multiple assets can be written off.
What items can I claim?
The scheme applies to assets that have a limited life expectancy and can reasonably be expected to depreciate in value over the time they are used.
Assets commonly written off in this scheme include:
- Computers, laptops and tablets
- Office furniture (freestanding)
- Office equipment (for example, printers, coffee machines)
- Motor vehicles (for example, cars, vans and tractors)
- Tools and equipment
Should I rush out and buy new assets now or later?
Up until EOFY on 30 June 2023, SMEs can still take advantage of the current Instant Tax Write-Off Scheme. To recap, this scheme allows SMEs to claim instant relief on items up to $150,000.
If your business requires immediate relief after a hard few years, it could be worth purchasing and installing any new assets you require now.
Get a move on though, as these assets need to be ready for use by 7.30pm AEDT on 30 June 2023.
Energy-saving technology tax incentive for businesses
Businesses with an annual turnover of less than $50 million will also get a 20% additional deduction for many items that encourage efficient energy use, such as energy-efficient fridges, electric cooling systems and batteries.
Up to $100,000 of total expenditure will be eligible for the incentive, with the maximum bonus tax deduction being $20,000 per business.
Eligible assets or upgrades will need to be first used or installed ready for use between 1 July 2023 and 30 June 2024.
How Diamond IT can help
Subject to eligibility advice on what is deductible, from your accountant, Diamond IT may be able to support you directly or with consultative advice around Infrastructure, Cloud Computing and Cyber Security - Systems, Posture, Governance and Training.
As a general guide, we typically recommend that Diamond IT customers have a spare of all critical equipment (such as a spare laptop/PC/switch) on hand.
Our team has significant experience working with a range of customers to ensure their technology strategy and investments are in line with and supporting key business drivers and strategic objectives.
Talk to us today on 1300 307 907 for more information on how we can work together with you on your technology roadmap.
