In the latest budget, the government slashed the amount SMB companies could claim for their investment allowance from July. With such low thresholds, it will be easy to exceed without even trying. If you are considering upgrading your IT systems, I suggest you don't wait - act fast! Doing so will give you a significant financial advantage because taking full advantage of this tax break allows you to lower your tax bill. You can use the savings to purchase new hardware while reducing your tax liability at the same time.

In the budget, one change made that retailers need to be aware of now. Before you only had to pay superannuation if an employee monthly income from you exceeded $450. This was handy as it reduced much administrative burden over what was so little. Remember the government commitment to reduce “red tape”? Anyway, this $450 monthly threshold is now gone. No matter how little money you pay a person in salaries, you have to pay the superannuation.

Also, the superannuation rate will increase to 10% on July 1, 2021. Count on it going up again very soon as the government plan is to raise superannuation to 12%,

All this needs to be budgeted by you.

Yesterday’s budget had two positive points for SMB, which need the instant attention of many of our clients. This is we are now in this financial year.

The first is that the immediate asset write-off goes for another 12 months. Facts have proved that this is an excellent way to increase cash flow. If you can get this money, it is shameful to miss it.

The other is a new law introduced by the government that allows companies to carry forward tax losses.

Now I am not an accountant, but this is my understanding of how it works.

Suppose you paid $27,500 in taxes two years ago. Last year there was nothing. This year, you are looking for a tax loss of $25,000. Assuming you pay 26%, you now owe ATO about $6,500

Since $6,500 is less than the $27,500 you already paid. When you file your tax return this year, you may be able to request a refund on the $6,500 based on what you had paid two years ago.

Due to some exceptions, not all tax losses are claimable here. If so you may not be able to cash the tax losses as described above.

So, you may find that some pre-planning may help you now. So please *immediately* ask your accountant about these two items.

The good news is that the instant asset write off has been extended for this financial year and even better has been increased from $20,000 to $25,000. This tax write off has saved heaps of money and cash flow for my clients.

Here is how it works

Say you were to buy a point of sale system for $5,000. The first point is to the ATO it does not cost $5,000 as 10% of this is GST which you will be getting straight back so the proposed cost is $4,500.

The system without the Instant Tax write off would allow only 15% of this would be allowed as depreciation, which works out to a tax deduction of $675

- As the company tax rate is say 27.5%, the business would get back $185.63 in income tax credits.

** This means the business needs to fund this purchase in the first year $4,314.38 **

However, with the Instant tax write off in place

- 100% of this would be allowed as depreciation

- If the company tax rate say 27.5%, which means the business will get back $1,237.50 in income tax credit.

** Which means that the business needs to fund this purchase in the first year $3,262.50 ** which is $1,051.88 less

This is a fairly substantial saving!

The bad news is that the government did not make it permanent and it appears that the Labor party if elected will not renew it, but replacing it with their own scheme which has some advantages but in this case only gives here a 20% write off. 

** Which means that the business needs to fund this purchase in the first year $5,252.50 ** which cost you $990 more.

If you want to take to take advantage of the instant asset write off it closes the 30th of June this year and if you miss out whether you can get as good a deal like this next year, I suspect is very dubious.

So if you are looking to get or upgrade a point of sale system from us, NOW is the time.

Be aware that if you have a computer at home which you do work on for your business, you may be entitled to claim many other expenses including many other costs such as the desk, chair, lamps, carpets, lighting, etc for the area from which you conduct business.