New Year's resolutions and actions

New Year's resolutions and actions

The start of every new year is often a time for reflection and the making of resolutions. When it comes to small business owners the start of each calendar year is not only a time for reflection, but also should be a wake-up call to the fact that half of the financial year has gone, and there are now less than six months to make sure your business and taxation opportunities are maximised.

For the 2018 financial year, as a result of a number of changes to small business tax incentives, it will be more important than ever that owners assess how their businesses are performing for the 2018 year and take action before it is too late.

The New Year is a wake-up call for small business.

The New Year is a wake-up call for small business.

Photo: Marek Uliasz

One of the changes to income tax legislation, which was originally announced in the 2015 federal budget but took more than 12 months to pass both houses of Parliament, was a change to the definition of a small business for income tax concession purposes. From July 1, 2016 businesses with a turnover of less than $10 million have access to almost all of the small business tax concessions.

The only concessions that still have the old $2 million turnover limit are the small business capital gains tax concessions. Interestingly if this turnover limit is not passed, small business owners can still access the concessions if they pass the $6 million net asset test.

As a result of the delay in the passing of the legislation increasing the turnover test to $10 million, another measure announced in the 2015 federal budget had its term extended by 12 months. This measure allowed eligible small businesses to claim an instant tax deduction or write-off of assets costing less than $20,000.


This instant write-off was meant to apply to asset purchases from May 12, 2015 up to June 30, 2016. As a result of the increase in the small business income threshold not being passed in a timely manner, the ability to claim the write-off was extended to June 30, 2018.

The extension to the instant write-off means small business owners who have a profitable 2018 year and need to replace or upgrade plant, equipment and motor vehicles over the next 12 to 18 months, should seriously consider making the purchase before June 30, 2018.

The deduction can be applied to each asset that costs less than $20,000, and includes new and second-hand assets purchased and installed ready for use by June 30, 2018. Among the assets costing less than $20,000 that cannot be written off in full are horticultural plants including grapevines, software development costs allocated to development tools, and capital works that include buildings or extensions and other structural improvements.

Where the purchase of an asset costing under $20,000 would cause cash flow problems, given that the ability to deduct the cost of these assets ceases on June 30, 2018, it makes sense to finance the purchase other than through a lease. This will result in a tax deduction for the full cost of the asset, a reduction in tax for the 2018 year, and the cash flow cost being spread over the term of the finance agreement.

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