Step-by-Step Guide to New Tax Deduction Rules for Small Businesses

Step-by-Step Guide to New Tax Deduction Rules for Small Businesses

Introduction

The Australian Taxation Office (ATO) has introduced new tax deduction rules, allowing small businesses to claim an immediate deduction for assets costing less than $30,000. This guide provides a detailed analysis of the new rules, including examples of eligible assets, specific requirements, and guidance on how to review your business expenses to ensure you are taking full advantage of available tax deductions.

Step 1: Understand the New Rules

  • The ATO has increased the instant asset write-off threshold to $30,000 for small businesses with an annual turnover of less than $50 million.

  • Eligible assets include:

    • Plant and equipment

    • Motor vehicles

    • Furniture and fixtures

    • Computers and software

    • Other business assets

  • The asset must be purchased and installed ready for use between 7:30 pm AEDT on 2 April 2019 and 30 June 2020.

Step 2: Review Your Business Expenses

  • Review your business expenses to identify potential tax deductions.

  • Consider the following:

    • Assets purchased in the current financial year

    • Assets purchased in previous financial years that have not been fully depreciated

    • Assets that are no longer needed or are obsolete

  • Ensure you have accurate records of all business expenses, including receipts, invoices, and bank statements.

Step 3: Determine Eligibility

  • Check if your business meets the eligibility criteria:

    • Annual turnover of less than $50 million

    • Asset cost is less than $30,000

    • Asset is used for business purposes

  • Ensure you have documentation to support your claim, including:

    • Receipts and invoices

    • Bank statements

    • Asset registers

Step 4: Claim the Deduction

  • Claim the deduction in your business's tax return.

  • Ensure you have completed the necessary forms and schedules, including:

    • Business activity statement (BAS)

    • Company tax return

    • Individual tax return (if applicable)

Key Takeaways

  • The instant asset write-off threshold has increased to $30,000 for small businesses.

  • Eligible assets include plant and equipment, motor vehicles, furniture and fixtures, computers and software, and other business assets.

  • The asset must be purchased and installed ready for use between 7:30 pm AEDT on 2 April 2019 and 30 June 2020.

  • Ensure you have accurate records of all business expenses and documentation to support your claim.

Recommendations

  • Review your business expenses regularly to identify potential tax deductions.

  • Consider consulting with a tax professional to ensure you are taking full advantage of available tax deductions.

  • Ensure you have accurate records and documentation to support your claim.

  • Claim the deduction in your business's tax return.

Deadlines and Timelines

  • The instant asset write-off threshold applies to assets purchased and installed ready for use between 7:30 pm AEDT on 2 April 2019 and 30 June 2020.

  • The deadline for lodging your business's tax return is:

    • 31 October for companies and trusts

    • 15 May for individuals (if lodging through a tax agent)

  • Ensure you lodge your tax return on time to avoid penalties and interest.

By following this step-by-step guide, small businesses can ensure they are taking full advantage of the new tax deduction rules and maximizing their tax savings. Remember to review your business expenses regularly, determine eligibility, and claim the deduction in your business's tax return.

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