Since it’s right just around the corner, let’s talk about Australia’s EOFY.
We’re at that time of the year again when small businesses like ours prepare for the End of the Financial Year (EOFY). Chances are, you and your accountant have been talking about “instant asset write-off” and tax-deductible expenses. The EOFY is something that you shouldn’t miss if you’re running a small business.
During Australia’s EOFY, the Australian Government provides an instant asset write-off scheme to assist qualified businesses in claiming an instant tax deduction for depreciating assets that meet specific criteria. Depreciating assets include but are not limited to machinery and equipment, motor vehicles, furniture and textiles and operation devices like computers, mobile phones and accessories.
The write-off works for both new and second-hand assets. It can be applied to multiple assets if each asset costs less than the relevant threshold. You can reduce your tax payments with an immediate deduction from the total cost of qualifying depreciating assets. With this benefit, you can invest more in your business and improve its productivity, competitiveness, and profitability.
Do you have expenses that you’ve been delaying? The EOFY might be the right time to reconsider taking advantage of the potential tax deductions. The instant tax write-off scheme is set to expire on the 30th of June, 2023.
It’s essential to know that the qualifying rules may change yearly. The same goes for the regulations on the highest amount you can claim through the instant asset write-off. It’s best to check with a financial business advisor to determine whether your business is eligible and how much you can claim.
Machinery and Vehicle Financing Options for Businesses During Australia’s EOFY
June is the EOFY and is often considered by small businesses as the best time for purchasing a vehicle. Not only are dealerships slashing prices and offering better financing, but your purchase can also qualify for Instant Asset Write-off.
During the EOFY, equipment and vehicle financing options are offered at lower upfront costs, competitive pricing, and very flexible financing options. The repayment terms are commonly offered in ranges from two to five years. It is important to note that cars costing more than $64,741 are excluded from the instant tax write-off.
What can you claim during Australia’s EOFY if you have a small business?
- If your business earns less than $50 million in total turnover, you may claim the entire cost of all suitable second-hand assets.
- If your business earns less than $5 billion in total turnover, you may claim a tax write-off for unlimited new eligible assets, regardless of your assets’ dollar value. Improvement costs for illegible assets (new and existing ones) can also be claimed. While there is no limit to how many assets you can claim from the write-off, the installed value for every asset purchased must not exceed $20,000.
- To be eligible, new assets must be used or installed for the first time for a taxable purpose between 6th October 2020 at 7:30 pm (AEDT) and 30th June 2023.
What are the exclusions and limits?
Not all assets are eligible as tax-deductible expenses. Here are some exclusions:
- Business assets located or used overseas.
- Building assets that are eligible for capital work deductions.
- Primary production assets like water facilities.
- Assets that are not used for the specific registered business.
Not sure where to get started?
Remember that tax deductions are only worthwhile if your business expects tax liabilities. While it may sound ideal just to purchase the EOFY, consider it and think if the spending will cause cash flow issues. Talk to Jason Haworth to determine how to make the most of the instant asset write-off before the 2023 EOFY.
