Business Tip - Delay Asset Purchases

Small business taxpayers will soon benefit from more generous depreciation rules which will ultimately improve cash flow by allowing bigger deductions in earlier years following the purchase of a depreciating asset (e.g. office machines, furniture, equipment, cars etc.). Commencing 1 July 2012, small business taxpayers (i.e. those with an annual turnover of less than $2 million, including the turnover of affiliates and associated

entities) will benefit from the following two measures:


1. Increased instant asset write-off threshold:


From 1 July 2012, small businesses will be able to write-off depreciating assets costing less than $6500 (up from $1000) in the income year in which they start to use the asset or have it installed ready for use. In view of this measure, if you are thinking of purchasing a low value asset between $1000 and $6500 for your business, to get a cash flow advantage you may wish to delay the purchase until after 30 June 2012.


2. Special rules for cars:


From 1 July 2012, a small business can write-off as an immediate deduction the first $5000 of a car in the income year in which they start to use it (new or second-hand). The remaining value of the car is depreciated as it is now - through the small business

general depreciation pool at a rate of 15% in the first year and 30% in later years. Again, in light of this measure, it may pay to delay the purchase of any business-related vehicle for another few months (until after 30 June).


Information provided by the Australian Bookkeepers Network Pty Ltd