GST for small business: Everything you need to know
As we count down the weeks until the end of the financial year, small business owners across Australia should all be thinking about things like depreciation, capital expenses, and tax write-offs. But what does all this actually mean?
Unless you’re an accountant, wrapping your head around what you’re allowed to claim at tax time can be confusing. Yet having a little insight into the government’s rules can be helpful – particularly if, at this time of year, you’re starting to think about investing in something new for your business. If you time it right, your new purchase could help slice a chunk off this year’s tax bill.
We’re here to help. Read on to learn about your options and how they could help you save.
First, there’s the instant asset write-off
The instant asset write-off is a government initiative that lets you claim an immediate deduction for the business portion of assets purchased during the financial year.
For small businesses, the write-off is available to those who have an aggregated turnover (that is, the total ordinary income of your business and any associated businesses) of less than $10 million. For medium to large sized businesses, you’re eligible as long as your aggregated turnover is under $500 million.
The 2021 threshold for what you can claim has risen to $150,000 – up from $30,000 last year. This is a huge jump and represents a big opportunity for small businesses to save at tax time.
But here’s the kicker. In the 2020/21 financial year, it only applies to assets first used or installed ready for use between 12 March 2020 until 30 June 2021 and purchased by 31 December 2020. Any big purchases you make between now and tax time won’t be claimable under this scheme (don’t worry … you’ve got other options, as we’ll explore below).
So have a think about what you bought for your business last year and consider claiming it under the instant asset write-off scheme. As long as the asset is installed and ready for use by 30 June 2021 and purchased by 31 December 2020 it’s likely to be claimable under the increased threshold.
Then, there’s temporary full expensing
For purchases between now and tax time, you can use temporary full expensing to immediately deduct the business portion of the cost of the new assets you buy. The idea is that you can pool the costs of multiple new purchases under this scheme. So, that second coffee machine you’ve been thinking about, along with a new dishwasher out back? Now could be the perfect time to buy.
To be eligible for this option, your aggregated turnover must be below $5 billion (yes, you heard right!). You may also be able to write off second-hand depreciating assets if your aggregated turnover is below $50 million.
According to the ATO, there’s no limit on the cost of eligible assets you can apply this to. Yet certain assets, like cars, may have specific limits.
If you’re thinking about investing in new equipment before tax time and want to make the most of temporary full expensing, your safest bet is to have a quick chat with your accountant to confirm what’s eligible and what you’ll gain – and then start shopping.
Need extra funds for all this new equipment?
Tyro’s unsecured business loan gives you access to funds, fast. Simple and flexible, our loan has helped heaps of businesses large and small to buy coffee machines, bar stools, extra summer stock, and much more. Others use our loan to take on new staff or manage cash flow – it’s up to you.
For example, surf company Onboard Industries used a Tyro business loan to purchase new surfboards from overseas to beef out its in-store board collection.* “When our large production orders are needed, sometimes we don’t have the cash available to pay for the first-up deposit – which is quite large. Having access to a Tyro loan really helps,” said Ellis Gerry, Manager at Onboard Industries.
Keen to know more about prepping for tax time?
A quick chat to your accountant now – even though there’s a good 3 weeks or so until tax time – could really pay off in terms of helping you work out whether now is a good time to invest in new equipment for your business.
If the time is right to invest in your business, use our small business loan calculator to see what your repayments would look like. Once you’re happy with your repayments schedule, check your eligibility in a matter of minutes via the Tyro App which can be downloaded via the App Store or Google Play™.
Alternatively, call the Tyro team on 1300 00 TYRO (8976) to speak with one of our banking specialists.
*Tyro loans are subject to Tyro’s eligibility and credit criteria. A personal guarantee is required. Other conditions may apply.
Tyro provides this article for general information and educational purposes and does not take into account the financial situation or needs of any reader. The information provided must not be relied upon as financial product advice. Taxation considerations are general and based on present taxation laws and may be subject to change. You should seek independent, professional tax advice before making any decision based on this information.
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