Home – New Forums Money matters Should I expense this?

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  • #987742
    fanixaus
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    Hi,

    On Friday I had an accountant setup a Pty Ltd for me.

    I received an invoice from him today for $1100. Should I expense this through my new company? Would this be a good thing to do? This will be the first thing I’ll be expensing.

    #1164149
    Jimmy1
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    You can record it anyway you want. If you feel it appropriate to treat it as an expense so it reflects on your profit and loss in the first year you can.

    You can treat it, more appropriately, as a capital expense on your balance sheet in an account called Setup Costs.

    However you treat it, for tax purposes it is a capital expense that will be deductible under special rules over 5 years on a straight-line basis.

    #1164150
    James Millar
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    The conventional practice in small business reporting is to capitalise the amount and amortise or expense for tax purposes over five years as allowed under the sect 40-880 blackhole provisions. Using that approach your balance sheet and accounting treatment will mirror your tax treatment. If you were to strictly apply Accounting Standards then arguably capitalising the cost to the balance sheet would be inconsistent with the definition of an “asset”. In that case it would be expensed or impaired and amortised in full in year one.

    Go with conventional practice. Capitalise and expense / deduct over five years.

    Helping build better businesses and better lives with expert financial and taxation advice. [email protected] www.360partners.com.au 03 9005 4900
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