Home – New › Forums › Money matters › $20,000 small business tax write off??? I don’t understand
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May 10, 2017 at 7:23 am #996556Up::0
Hi people,
Im a bit useless when it comes to finances and taxes etc but was hoping someone on here with a bit more know how could try and explain the budget $20,000 incentive for small businesses. I just don’t understand what’s so great about it.I’m a sole trader, carpentry business. How can I use this to my advantage. Maybe if you could explain an example and how it affects my bottom line.
Say I go out and buy some new tools at $2000. At the end of the year I claim them anyway as tools for the business. So what’s the difference? Sorry if I seem really dumb I just don’t really understand this stuff. Go easy on me. And thanks for listening
May 10, 2017 at 9:24 am #1208012Up::0Hi Chippy Rain
It is a good question. The basic advantage applies where you usually need to deduct the cost of that item over a period of years (such as a laptop). With the incentive, you potentially could deduct 100% of the cost in that tax return
Your accountant will be able to give you advice on the purchase and ‘effective life’ of specific items, and how it affects your bottom line.
Regards
DavidMay 12, 2017 at 5:39 am #1208013Up::0Hi Chippy Rain – an example of how you could use this to your advantage is as follows;
Lets say you are planning to buy a new trailer or other piece of quite expensive equipment for $19,000 at some stage in the next year and you work out this year has been a cracker and you are looking at a big tax bill – (don’t go and buy a new car for the hell of it) so you go and buy the equipment in June under the current law you can claim the whole thing as a deduction if its under $20,000 reducing your big tax bill this year.
Normally a big piece of equipment like this would be claimed over the life of the asset and not in one year.
At the end of the day if you have not had an awesome tax year it will be hard to take advantage of this tax break and you may be better to not buy the equipment at all or just claim it like normal over a number of years.
Currently this write off will end June 30 this year – in the budget they have proposed to extend it by 12 more months – this law has not passed yet though.
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