For small business owners, there are proposed tax legislation changes that will significantly affect tax concessions.

Who do these small business concessions apply to?
Businesses with an annual turnover of less than $2,000,000.

What does this mean for your business?

From 1 January 2014, the “Small Business Capital Allowance Concessions” are being abolished. This means:

  • Immediate tax deductions for purchases of new motor vehicles of $5,000 plus 15% in the first year will be eliminated. Instead, the deduction will be 15% in the first year and 30% in following years.
  • For other capital equipment, the immediate deduction threshold will be reduced from $6,500 to $1,000. Any new equipment over $1,000 will be deductible at 15% in the first year and 30% per year thereafter.

Here’s an example…

If you purchase equipment that costs $6,000 and it is installed and ready for use on or before 31 December 2013, you can immediately write-off the $6,000 cost. However, should the same asset be installed and ready for use from 1 January 2014 you will only be able to deduct $900 in the first year.

Similarly, if a business purchases a motor vehicle that costs $20,000 and it is first used by 31 December 2013, the deduction in the first year would be $7,250. Should the motor vehicle be acquired from 1 January 2014, the deduction would only be $3,000. If the Senate pass the Bill in its current form, the changes will have a significant impact on small businesses.

What can you do now for your business?

If you are considering purchasing new equipment or a motor vehicle for use in your business, you should consider purchasing the asset and having it installed and ready for use before 1 January 2014 so you can increase the deductions for which you’re eligible.

Considering purchasing equipment or vehicles for your business? Contact Richard Korda, our Business Finance Director or your CAAA Adviser on 02 9299 1200 to discuss further.

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