Last year’s budget was one for small businesses. This year, the small gift is a one year extension of the $20,000 instant asset write-off for 2017-18. Unfortunately, the government will tighten access to the small business CGT concessions.
$20,000 instant asset write-off
The $20,000 instant asset write-off will be extended for another 12 months until 30 June 2018. This was due to revert to $1,000 on 1 July 2017.
Under this measure, small businesses (with aggregated turnovers of less than $10 million) will be able to immediately deduct purchases of eligible assets costing less than $20,000 first used or installed ready for use by 30 June 2018.
The business community has been asking for the $20,000 write-off to remain permanently. Although the extension of one year is less than what most business owners would prefer, it is nevertheless a good step.
The annual aggregated turnover threshold to access this concession has also been increased from $2 million to $10 million from 2016-17. The threshold increase along with this Budget announcement means that many more businesses will be able to access this concession than in previous years.
Assets costing $20,000 or more can continue to be placed into the simplified depreciation pool and depreciated at 15% for the first income year and 30% for each income year afterwards. The pool balance can also be immediately deducted if it reduces to less than $20,000 during this period.
Small business CGT concessions
The government will amend the small business CGT concessions to ensure that the concessions can only be accessed in relation to assets used by a small business or ownership interests in a small business.
The concessions assist owners of small businesses by providing relief from CGT on assets related to their business that help them to re-invest and grow, as well as contribute to their retirement savings through the sale of the business.
The measure, with application from 2017-18, will affect taxpayers:
- that are small businesses with annual aggregated turnover of less than $2 million, or
- whose asset was used in a connected small business, or
- who have a maximum net asset value not exceeding $6 million.
However, without legislative detail being available, it is a little unclear as to whether the measure will result in:
- the concessions becoming unavailable in relation to passively held assets, or
- the concessions only being available in relation to passively held assets if both parties are small businesses.
In either case, it would appear that this measure will have the effect of restricting the availability of the small business CGT concessions. This is disappointing, especially with the turnover threshold remaining at $2 million while the threshold for all other small business concessions increased to $10 million or $5 million from 2016-17.
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