Updating assets worth considering with government increase
WITH the government increasing the instant asset write-off threshold in the wake of the COVID-19 pandemic, local businesses might consider updating their assets before June 30.
Local chartered accountant and tax adviser Jesse Williamson said the JobKeeper program had taken the limelight from the two other measures: the increase to the Instant Asset Write Off and Backing Business Investment Incentive the government had announced in mid-March.
"These measures are worth considering particularly in the context of restarting a suspended business," he said.
"The Instant Asset Write Off (IAWO) threshold has been increased from $30,000 to $150,000 for new and second hand assets first used or installed ready for use from 12th March 2020 to 30th June 2020, while the Backing Business Investment (BBI) of 50% is a write off on any new asset of any value.
"The IAWO is simply a very short term - 12th March 2020 to 30 June 2020 - extension to the IAWO that started at $1,000, then variously went to $20k, $25k, $30k and is likely to revert to $1,000 in July of this year.
"It provides for the immediate write off for tax purposes of new and new to the business (second-hand) depreciable assets and to be eligible businesses must have a grouped turnover of less than $500m (also temporarily up from $50m).
"The BBI is a different beast; the same turnover rules apply however the write off is capped at 50% of the assets cost, it is also limited to brand new assets only and runs from 12th March 2020 to 30 June 2021.
"Importantly the assets cost is not limited under the BBI.
"After the BBI is applied the business continues to apply the standard depreciation rules used by the business, they can't then go on and apply the IAWO."
Jesse highlighted that accountants often get calls about accelerated write-offs when the thresholds are tweaked leading up to an election or during an economic slump.
"To which most of us reply that the smart money doesn't spend money solely because of tax outcomes.
"Having said that if your business is planning to purchase new depreciable assets in the next six to eight months it may be sensible to purchase sooner rather than later - that is in the next four weeks for the IAWO or during the 2021 financial year for the BBI.
"Both measures apply to assets that are financed as well.
"Of course, you need to keep in mind that any tax benefit arising is not immediate and will only be 'felt' for cash flow purposes upon lodgement of the year in questions tax return - and only when lodging for a profitable year.
"Profitable years may be a couple away for some businesses which means the benefit may be deferred until then.
"Finally, perhaps as many businesses have moved into survival mode the decision to spend scarce funds on equipment is just not one being considered, but perhaps it should be?"
With COVID-19 restrictions easing and government assistance packages for businesses and individuals, Bundaberg Toyota general manager Travis Modesti is predicting a big bounce back for the local car industry in early June.
Travis said no matter what type of business you own it is pretty safe to say that you need a vehicle to complete some or all tasks for the business.
"We all know that vehicles will depreciate in value so being able to write the full amount off from the start will open up more options for the business later on," he said.
"With the previous limits on the instant tax write-off you were very limited for choice in vehicles, however it is an ideal time to be able to get the right vehicle and not just settle for a price point.
"The great thing about the Instant Write Off Scheme is that it can be new or pre-owned vehicles that can be purchased, and this opens up plenty of options for our guests.
So far, we have seen a big increase in numbers of the traditional commercial vehicles being purchased such as dual cabs and vans; however, one segment which businesses are also taking advantage of is the booming market of Hybrid vehicles.
"With more options and configurations to suit everyone, plus the added benefit of being future proof in aligning with the government's emission expectations, it is an ideal segment to take advantage of and not to mention it will save money for the business on fuel from day one."
Whatever a client needs, the market is quite buoyant at the moment, especially in the pre-owned market which is great news for the Bundaberg community showing a high level of confidence in the local retail market.
"Our safety of our guests and staff have been our number one priority during these times and we have been able to restructure our business to be able to satisfy our guests needs depending upon their requirements."