Asset purchases costing less than $20,000

Client H asks: I want to buy an Excavator worth $250,000, a pneumatic hammer worth $19,500 and an excavator bucket which costs about $18,500. My total spend will add to $288,000 plus GST.  I’ve heard something about getting a deduction for purchases under $20,000. What can I claim?

Noel says:

  • New laws have passed that allow small businesses to claim an immediate deduction for assets they start to use, or have installed ready for use, provided each depreciable asset costs less than $20,000 exclusive of GST.
  • This measure starts 7.30pm (AEST) 12 May 2015 and will end on 30 June 2017.
  • Assets that cost $20,000 or more (which can’t be immediately deducted under other provisions) are deducted over time using the general small business pool. Under the pooling mechanism a deduction for 15 per cent of the cost is allowed in the first income year with a diminishing value rate of 30 per cent deduction on the opening pool balance allowed for each income year thereafter.
  • To qualify as a small business, the new business must have aggregated turnover of less than $2 million. Aggregated turnover is the sum of your gross income or proceeds (rather than your net profit) for an income year. It also includes the annual turnover of any entity that you are connected with or that is an affiliate of you at any time during that income year. It doesn’t include any goods and services tax (GST) amounts you have charged on your sales.
  • So if you could get separate invoices from the pneumatic hammer and the excavator bucket (being separate assets that are each available to purchase from the seller’s price list) at a GST exclusive price of less than $20,000 each, then you would get an immediate tax deduction for those costs rather than write off the total over what would amount about 15 years.

Hope this helps.  If you want to discuss these opportunities further, feel free to give me a ring on 03 9585 7555 or email me atnoel@mktax.com.au

Noel

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