Exciting news for small businesses! Two significant changes are happening for the 2024 financial year, thanks to new laws passed by Parliament recently.
Instant Asset Write-Off Increase
First, the instant asset write-off threshold has been raised from $1,000 to $20,000 for business annual aggregated turnover less than $10 million. This means that small businesses can now write off purchases of assets costing less than $20,000 in 2024 financial year. This change is a big boost for cash flow, as businesses can claim the tax deduction immediately instead of spreading it out over several years.
To take advantage of this, the asset must be bought and either used or installed and ready to use between 1 July 2023 and 30 June 2024. For example, if you buy an industrial fridge, it needs to be delivered and installed by 30 June 2024 to qualify for the write-off.
If the business is registered for GST, the cost of the asset must be less than $20,000 after deducting GST credits. If the business is not registered for GST, the cost must be $20,000 including GST. If the asset is only partly used for business, to determine the amount you can claim, subtract the portion used for private purposes. The remaining balance, which is the portion used to earn assessable income, is typically considered the taxable purpose portion (or business purpose portion). Although you can only deduct the taxable purpose portion, the total cost of the asset must be below the $20,000 threshold.
This new threshold applies to each asset individually. So, a small business can deduct the full cost of several items as long as each one costs less than $20,000. Additionally, a Bill is currently before Parliament to extend this increased threshold to 30 June 2025.
Small Business Energy Incentive
Another great benefit for small businesses is the new small business energy incentive. This incentive provides an extra tax deduction of 20% for the cost of eligible assets and improvements that make your business more energy-efficient or support electrification, such as purchasing of an air conditioner that replace a gas heater, installing time-shifting devices which allow electrical appliances to operate at off-peak times, etc.
There are some exceptions for the energy efficiency solutions, such as no bonus deduction for electric vehicles, solar panels, capital works, etc. Also, the maximum bonus deduction is $20,000, which means you can spend up to $100,000 on qualifying expenses happened between 1 July 2023 and 30 June 2024. Different from the Instant Asset Write-Off, this incentive is available to businesses with an annual turnover of less than $50 million. However, businesses with an annual turnover less than $10 million may can potentially claim both the Instant Asset Write-Off and Small Business Energy Incentive for the eligible assets and improvements. To read the details about the policy, please refer to our previous article ‘Empowering Your Business with Electrification: Unlocking the $20k Tax Deduction’.
Summary
These changes provide fantastic opportunities for small businesses to improve their cash flow and invest in energy-efficient equipment. With the increased write-off threshold and the energy incentive, make sure to check if your purchases qualify and take full advantage of these new laws.
Pitt Martin Group is a CPA accounting firm, providing services including taxation, accounting, business consulting, self-managed superannuation funds, auditing and mortgage & finance. We spend hundreds of hours each year on training and researching new tax laws to ensure our clients can maximize legitimate tax benefit. Our contact information are phone +61292213345 or email info@pittmartingroup.com.au. Pitt Martin Group is located in the convenient transportation hub of Sydney’s central business district. Our honours include the 2018 CPA NSW President’s Award for Excellence, the 2020 Australian Small Business Champion Award Finalist, the 2021 Australia’s well-known media ‘Accountants Daily’ the Accounting Firm of the Year Award Finalist and the 2022 Start-up Firm of the Year Award Finalist, and the 2023 Hong Kong-Australia Business Association Business Award Finalist.
Pitt Martin Group qualifications include over fifteen years of professional experience in accounting industry, membership certification of the Australian Society of Certified Practising Accountants (CPA), Australian Taxation Registered Agents, certified External Examiner of the Law Societies of New South Wales, Victoria, and Western Australia Law Trust Accounts, membership certification of the Finance Brokers Association of Australia Limited (FBAA), Registered Agents of the Australian Securities and Investments Commission (ASIC), certified Advisor of accounting software such as XERO, QUICKBOOKS, MYOB, etc.
This content is for reference only and does not constitute advice on any individual or group’s specific situation. Any individual or group should take action only after consulting with professionals. Due to the timeliness of tax laws, we have endeavoured to provide timely and accurate information at the time of publication, but cannot guarantee that the content stated will remain applicable in the future. Please indicate the source when forwarding this content.
By Angela Abejo @ Pitt Martin Tax
