Is It Really a 100% Tax write off? Yes and No…

Last month, the government announced its 2015 budget with the new small business tax break. A $20,000 asset write off! But it has left a few of us with questions. Is this free money? How does it work? What’s the catch? And, what’s a budget?? Jokes aside, please keep in mind we are production professionals, not financial advisors. This article is merely just to spur the conversation, and help our friends to use this glorious advantage. Let’s take a look.

Under the old scheme, businesses could only claim 15% of a depreciation value on a pool of acquired assets with individual costs of over $1,000. The business tax rate of 30% means you could then claim 30 cents in the dollar of the depreciated asset as your return.

cash1Example – Old Scheme

Let’s say you purchased a new computer costing $5,000 and a printer for $2,000, totalling $7,000. With a 15% tax claim, that leaves you with $1,050 of depreciation value of your $7,000 total pool of assets in the first year. With the 30% tax rate of the $1,050 depreciation value, that leaves you with a return of only $315.

Between now and when the old scheme reverts back in June 2017, the new advantage is to be able to claim 100% depreciation value of individual assets with a new tax rate of 28.5 cents in the dollar. Anything over $20,000 defaults to the old scheme.

Example – New Scheme

With a 100% depreciation value of the computer at $5,000, the 28.5% tax rate leaves you with a return of $1,425. And 28.5% of the $2,000 printer leaves you with $516, with a combined total of $1,941.

A return of $1,941 may not be as much as receiving the whole $7,000 for your new computer and printer, but it’s certainly better than the previous return of $315! Or, a kick in the pants. Just think in how you can re-invest that $1,941 into your business! A new video maybe? …wink, wink.

You can read more here at the ATO website. Happy EOFY!

Love,

Your friends at Creativa

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