This year with the announcement of a new tax incentive that will allow small business to claim any business purchases for items up to $20,000 in value.
This means that, depending on your tax bracket, it may be possible to get a whopping 56% back from your purchase. Read on and we’ll show you how.
Check your business
The new rules for tax claiming are aimed specifically at small business, defined here as those that have an aggregated turnover of less than $2 million. If that’s you, then you’ll be eligible for some great savings.
Register for GST
If your business makes over $2 million per year then you should already be registered for GST. But just to give you a quick summary, you must register for GST if:
- Your business has a GST turnover (gross income minus GST) of $75,000 or more.
- Your non-profit organisation has a GST turnover of $150,000 per year or more.
- You provide taxi or limousine travel for passengers in exchange for a fare as part of your business, regardless of your GST turnover.
- You want to claim fuel tax credits for your business or enterprise.
Check your tax bracket
Next you need to know your tax bracket. This will be determined by how much money you make and can be figured out by the table below:
|Taxable income||Tax on this income|
|0 – $18,200||Nil|
|$18,201 – $37,000||19c for each $1 over $18,200|
|$37,001 – $80,000||$3,572 plus 32.5c for each $1 over $37,000|
|$80,001 – $180,000||$17,547 plus 37c for each $1 over $80,000|
|$180,001 and over||$54,547 plus 45c for each $1 over $180,000|
In past tax years it has been possible to reclaim the cost of asset purchases through depreciation, which is essentially the amount of value your asset loses each year that you own it. Previous rates had been set so that you could claim 15% of your purchase in the first year, and then 30% of the remaining balance each year until the whole balance would be written off. You still could do this, but this year has brought something new.
$20,000 first year tax claim
This year you will be able to reclaim the full amount of any purchase in the first year, on purchases up to $20,000. Now, obviously, this doesn’t mean free stuff. You’ll still have to buy the asset in the first place and you can only reclaim against your tax rate, but if you’re in the highest tax bracket that could be up to 56%.
So, if you buy something that costs $20,000 for your business, and you use it 100% for that business (ie, no personal use) and you’re in the highest tax bracket earning $180,001 or more and you’re registered for GST then after your claim the effective cost of that asset will be $9,636.36.
That’s a staggering saving of 56.09%.
And if you want more information, more numbers and more statistics, why not check out the page below. That has an in depth guide to claiming for your purchases of up to $20,000.
DISCLAIMER: Many of the comments in this article are general in nature and anyone intending to apply the information to practical circumstances should seek professional advice to independently verify their interpretation and the information applicability to their own particular circumstances.