JavaScript disabled. Please enable JavaScript to use My News, My Clippings, My Comments and user settings.

If you have trouble accessing our login form below, you can go to our login page.

If you have trouble accessing our login form below, you can go to our login page.

Small Business

You are here: Home My Small Business Tax Time

Search age:

Search in:

Tax time: Talking to the professionals

Date

Alexandra Cain

Debra Anderson has been telling clients not to expect a cheque from the ATO.

Debra Anderson has been telling clients not to expect a cheque from the ATO. Photo: Supplied

The feedback from the accounting profession is small businesses are delighted by the range of proposed tax incentives announced in this year's federal budget.

In particular they are happy with the $20,000 immediate tax deduction for assets, as it gives them an incentive to invest in their enterprise now.

Phones are ringing hot at accounting practices around the country with small business owners on the line wanting to know more about how the proposed tax benefits will work.

"I'm being asked whether this is inclusive or exclusive of GST," says Debra Anderson, an accountant with Legally BAS. "My response is it depends. If you are registered for GST then it's ex-GST but if you are not registered then it includes GST. This is because for GST-registered businesses, GST is not a cost."

Anderson says some clients have also asked if this tax incentive means they will receive a cheque from the ATO. "I have to explain it's a tax deduction and therefore you don't get a cheque but it reduces your income, just like expenses such as telephone and postage. It reduces the tax you need to pay at the end of the tax year."

"I've also been asked if it's possible to buy a new car for $35,000 and get it invoiced over two invoices. My answer is no, but nice try."

Maree Caulfield is director of taxation at MGI Accountants in Adelaide. She says clients are asking if they qualify for the incentive and which assets it applies to. They are also asking what they should buy and how it works with a car, particularly where it's only partly used for business purposes.

"If there is a capital purchase they are considering buying, this incentive is a really great way to help their cash flow," says Caulfield.

She reminds business owners that timing is everything. "Just because you order a car today doesn't mean you get the tax deduction in the 2015 year. It has to be delivered and ready for business use by June 30 to be deductible in the 2015 year."

Caufield also reminds businesses that to qualify, their turnover must be less than $2 million. "This takes into account not only the turnover of the business, but also any associated or connected businesses. So there are a number of businesses that may mistakenly think they qualify. You are also able to look at either current year or prior year turnover to work out if you qualify. So there may be benefit in doing something sooner, if you're getting close to the $2 million threshold."

Although the response to the tax incentives from small businesses has been positive, trading conditions remain challenging. Peter Nicol, director of accounting firm RSM Bird Cameron says he is advising small business clients that are considering making purchase just to take advantage of the tax deduction not to.

"If they don't need to spend the money there is no sense in generating a larger loss by undertaking unnecessary spending," he argues. "Spending money to buy assets that aren't really required for the business simply creates a cash flow drain on the business."

4 comments so far

  • Unfortunately the econocrats make these issues so complex that if a very small business with a small turnover well less than that required for GST, that they receive little or no tax benefits. If using own funds to set up a business it is never able to be recouped, tax deductions only reducing taxable income received, so that effective only about a quarter of the cost effectively received. The depreciation systems is so complex that to figure it out one needs to be Einstein and same with the tax systems. Amendments of the amendments. The choice is either to pay hundreds of dollars for an accountant who still doesn't get it right or even correctly state the nature of the business, or DIY? It is nigh time our tax system was simplified and simple programs designed and provided by the taxation system to record and calculate so business can insert their assets re depreciation, their deductions, etc then submit online? Simple!

    Commenter
    Possum 13
    Location
    Kiama
    Date and time
    June 15, 2015, 8:35AM

    • until the legislation is passed, by a hostile senate this tax deduction has no details published.
      The Greens should immediately announce that they will pass this good idea instead they remain silent perhaps waiting for the opportunity to use it as leverage for bargaining a deal.

      You should never get a tax refund. A good accountant will tell you that if you owe tax after the end of the financial year then the government has loaned you that money interest free. If you get a tax return then you have loaned your money to the government who pay no interest.
      Sure having money perhaps unexpected is a great "present" but if you need money at the time of a tax refund or to pay your tax then set up a weekly / monthly savings plan and stick to it - no matter what.

      Commenter
      Roo
      Location
      GEELONG
      Date and time
      June 15, 2015, 8:57AM

      • What are you talking about? Do you know the difference between a tax refund and a tax bill?

        Commenter
        Gordon Gekko
        Location
        Greg Coffey World
        Date and time
        June 16, 2015, 10:18AM

    • Just to clarify Nicol's viewpoint. If one spends $20,000 on a new Honda Civic to be used for business purposes, all that will do is reduce your tax by about $6500. So, you lose $20k in capital by spending it, but it reduces what your tax bill by$6500. So, you end up with a new car, but significantly less available cash or more debt if finance was used.

      Commenter
      Gordon Gekko
      Location
      Greg Coffey World
      Date and time
      June 16, 2015, 9:26AM

      Make a comment

      You are logged in as [Logout]

      All information entered below may be published.

      Error: Please enter your screen name.

      Error: Your Screen Name must be less than 255 characters.

      Error: Your Location must be less than 255 characters.

      Error: Please enter your comment.

      Error: Your Message must be less than 300 words.

      Post to

      You need to have read and accepted the Conditions of Use.

      Thank you

      Your comment has been submitted for approval.

      Comments are moderated and are generally published if they are on-topic and not abusive.

      Post another comment
      Featured advertisers
      Small Biz newsletter signup

      Small Biz newsletter signup Small Biz news delivered to your inbox twice-weekly.

      Sign up now