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Tax deductions for small business. How to get new equipment and let the government pay. Yeah, baby!

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Have you been meaning to replace that lump of junk you call a laptop? Need a more comfy office chair? How about a new paper shredder to replace the imported woodchuck you’ve been holding against its will for all these years?

Whatever, your needs are, now is the time.

Instant asset write off for small business. Yeah baby.

Here’s a neat little tax change that may have slipped your attention as we wind up this financial year. If you’re a SMB with less that $2 million in turnover annually, you’re getting a break – a tax break, that is.

The Australia ATO has increased the small business instant asset write-off threshold from $1,000 to $6,500. The change became effective in July last year but its relevance to small business owners is only likely to sink in now, as June 30 looms near.

Here’s what changed last year but might only seem important to you now:

  • The small business instant asset write-off threshold has increased from $1,000 to $6,500
  • Small businesses can claim an accelerated initial deduction for motor vehicles acquired in 2012-13 and subsequent years
  • The long life small business pool and the general small business pool have been consolidated into a single pool to be written off at one rate

Just think about what you can do with $6,500.

We’re no accountants (and it always pays to consult an expert) but say you buy a super-sexy new laptop, totaling $2,000. Since that amount is under the $6,500 threshold, you can claim an immediate deduction of $2,000.

See, told ya it’s a sweet deal!

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Vehicle deductions? Gotcha covered.

The new rules also let you claim an accelerated deduction for vehicles, too.

This type of asset works a little differently from others, though. The cost of the motor vehicle (which can only be used for business purposes, of course) is eligible for a deduction of up to $5,000 plus 15-per cent of the purchase amount.

Here’s an example of how this can work for you:

Rambo’s Farm buys a pickup truck that costs $11,000 to help deliver roosters to hen houses. Since that’s all the truck is used for, Rambo’s Farm can instantly write-off $6650, under the new rules.

It’s all-inclusive. Sweeeeeet!

For the 2012-13 income year, the long life business pool and the general small business pool have been consolidated, allowing all to write-off at the same rate.

The best example of this comes from the official Government announcement of the new rules:

Chantal’s Cafe is a small business entity. At the end of the 2011-12 income year, the closing balance of its long life pool was $8,000 and the closing balance of its general small business pool was $10,000.

For the 2012-13 income year, Chantal’s Cafe’s long life pool no longer exists, but its general small business pool opening balance is now $18,000 (that is, $8,000 + $10,000).

From the 2012-13 income year, the deduction for an asset acquired during an income year and allocated to the general small business pool is 15% of the taxable purpose proportion of its adjustable value. The general small business pool is written off at a rate of 30% per income year thereafter.

This means you. Maybe.

The new rules affect all SMBs with less than $2 million in turnover – so that could mean you, for real. Check out the ATO website to find out more. Happy EOFY Anthillians!

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