The $20K tax break 67% of small business owners are missing out on

The $20K tax break 67% of small business owners are missing out on

Tax time is fast approaching.

BY Business Chicks, 4 min READ
 

Whether you’re running a small business, side-hustle or new startup, tax time can be stressful – even if you have a killer accountant.

The sheer amount of preparation needed to file often outweighs the fun bit; deciding how to spend your tax return (reinvesting it in your business, right?). It’s a given that we – or our accountant or bookkeeper – could be missing out on  incentives and benefits, and that’s exactly what’s happening. There’s new research out that shows 67% of small businesses owners are missing out on claiming the $20K tax break the Government introduced two years ago.

The national survey, conducted by Officeworks and H&R Block, found that 78% of Australia’s small business owners (SBOs) don’t fully understand the $20K tax break, and only one in 10 Australian SBOs can identify seven or more items 
covered by the $20K tax break. We spoke to the Director of Tax Communications at H&R Block, Mark Chapman about how small businesses can make the most of the $20,000 instant asset write-off.

Q. What exactly is the 20K tax break?

“The tax break gives small businesses the opportunity to purchase any capital assets (new or second hand) for use in their business costing less than $20,000 (excluding GST) and to get an instant tax write-off for the cost. A small business is any business with an aggregate turnover of less than $10 million, which is over 99% of Australian businesses.”

Q. What types of items can be claimed?

“Items that qualify for the $20k tax break include motor vehicles, office furniture, items of technology like laptops, mobile phones, and tablets, tools, plant and equipment, kitchen equipment, TV’s, gym equipment, works of art and computer gaming terminals, providing they are used for business purposes.”

Q. Why has only been a 1% increase in SBOs making the most of the tax break from last year?

“The survey that was conducted by Officeworks and H&R Block found that seven in 10 small business owners rely on an accountant to compile a tax return. This could mean that small business owners aren’t getting full value from their accountant or bookkeeper. By all means, use a professional to make sure you comply with basic obligations like getting your tax return, or BAS submitted, but also set aside some time to talk about how tax can impact your business, both positively and negatively. Taking the time to do that will give your adviser the chance to talk through tax breaks like the instant asset write-off. At the moment, we don’t think that those conversations are happening often enough, hence the high level of lack of knowledge about this tax break.”

Q. What’s the best way for SMEs to prepare for tax time this year?

“Make the most of the $20K tax break by purchasing or upgrading your tech, equipment or furniture items and ensure your books and records are up to date ahead of the June 30 deadline for your accountant.”

Q. Anything else we should know?

“Although the $20,000 instant asset write-off has been extended to 30 June 2018 – a year later than the expected end date – it still makes sense to make purchases before this end of financial year to lock in the cash flow benefits. Remember also only to purchase those items your business really needs – there’s nothing to be gained by spending money just to get a tax break but if your business really could benefit from an upgrade in capital equipment to boost profitability and productivity, now is certainly the time to do it.”

 
 
 
 
 
 
 

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