The good news is that the instant asset write off has been extended for this financial year and even better has been increased from $20,000 to $25,000. This tax write off has saved heaps of money and cash flow for my clients.
Here is how it works
Say you were to buy a point of sale system for $5,000. The first point is to the ATO it does not cost $5,000 as 10% of this is GST which you will be getting straight back so the proposed cost is $4,500.
The system without the Instant Tax write off would allow only 15% of this would be allowed as depreciation, which works out to a tax deduction of $675
- As the company tax rate is say 27.5%, the business would get back $185.63 in income tax credits.
** This means the business needs to fund this purchase in the first year $4,314.38 **
However, with the Instant tax write off in place
- 100% of this would be allowed as depreciation
- If the company tax rate say 27.5%, which means the business will get back $1,237.50 in income tax credit.
** Which means that the business needs to fund this purchase in the first year $3,262.50 ** which is $1,051.88 less
This is a fairly substantial saving!
The bad news is that the government did not make it permanent and it appears that the Labor party if elected will not renew it, but replacing it with their own scheme which has some advantages but in this case only gives here a 20% write off.
** Which means that the business needs to fund this purchase in the first year $5,252.50 ** which cost you $990 more.
If you want to take to take advantage of the instant asset write off it closes the 30th of June this year and if you miss out whether you can get as good a deal like this next year, I suspect is very dubious.
So if you are looking to get or upgrade a point of sale system from us, NOW is the time.