As announced in our previous blog post, last year the federal government announced a big tax break for small businesses. The new legislation allows small businesses to claim an immediate deduction for assets they start to use – or have installed ready for use – so long as each depreciable asset costs less than $20,000. This change temporarily replaces the previous instant asset write-off threshold of $1,000 until 30 June 2017.
Ways to claim tour tax break
If your business turns over less than $2m in revenue per year, you can claim the full amount from your income to reduce your tax bill, there is also no limit on the number of items a business can claim. Examples include cars, vans, utes, trailers, motorbikes, lawnmowers, kitchens, tables and chairs, carpets, printers, photocopiers, tools, welding equipment, saws, generators, pumps, solar panels, water tanks, airconditioning units, sound and security systems, computers – any item used for running the business – will be 100 per cent tax deductible. You could also speak with Leafcutter about creating a new company website for you.
You cannot use the money to buy stock for your business. Horticultural plants and in-house software added to a development pool also do not qualify.
How can I claim a new website through tax deductions?
There under certain tax conditions where you may be able to claim a new business website as a tax deduction.
Scenario #1 – Claiming deductions through the software development pool
As a general rule websites are classified as ‘in house software’ by the ATO. In house software can only be depreciated at the average rate of 20% or over 5 years, as the software is expected to have a shelf life of 5 years. This is called a software development pool.
The ability to pool assets and depreciate the in house software in asset pools works out at the following rates:
- For expenditure incurred from 1 July 2015
- Year 1 – Nil
- Year 2 – 30%
- Year 3 – 30%
- Year 4 – 30%
- Year 5 – 10%
- For expenditure incurred up to 30 June 2015:
- Year 1 – Nil
- Year 2 – 40%
- Year 3 – 40%
- Year 4 – 20%
Scenario #2 – Claiming deductions through the $20k tax break concession
If you have opted to pool software assets in the example above, you generally cannot use the 2nd option of claiming the immediate $20,000 tax break as a one off.
However, if your business’s assets are not included in a software pool, then your business may be able to claim the 100% deduction for expenditure between 12th May 2015 and 30th June 2017 up to the threshold of $20,000. In short, if you do not use a software development pool to claim deductions, you may be able to claim a new $20k website under the ‘simplified depreciation rules’.
Who should I speak to?
We recommend you speak to your qualified tax advisory or accountant about how the tax break can work for you. If you believe you’re eligible, the team at Leafcutter are on hand to help bring your website or app idea to life.
Hurry, the financial year ends on June 30!
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