Maximising deductions for SBE taxpayers
Deductions can be maximised for SBE business taxpayers by accelerating expenditure and prepaying deductible business expenses. Former Simplified Tax System (‘STS’) taxpayers who have continued to use the STS cash method since before 1 July 2005 cannot accrue expenses, but other SBE taxpayers on an accruals basis can accrue expenses.
Accelerating expenditure – SBE
All SBE taxpayers can choose to write-off depreciable assets costing less than $20,000 in the year of purchase*. Also, assets costing $20,000 or more are allocated to an SBE general pool and depreciated at 15% (which is half the full rate of 30%) in their first year. Therefore, where appropriate, SBE business taxpayers should consider purchasing/installing these items by 30 June 2018.
It should be noted that SBE taxpayers choosing to use the SBE depreciation rules are effectively ‘locked in’ to using those rules for all of their depreciable assets.
Further note, former STS taxpayers who have continued to use the STS cash method since before 1 July 2005 and who qualify as an SBE are generally only entitled to deductions if they have paid the amount by 30 June.
(*) The small instant asset write-off threshold has been temporarily increased to ‘less than $20,000′, for assets acquired and installed ready for use between 7.30pm(AEST) 12 May 2015 and 30 June 2018. On 8 May 2018 the Government announced it intends to extend this date to 30 June 2019.
Prepayment strategies – SBE
SBE taxpayers making prepayments before 1 July 2018 can choose to claim a full deduction in the year of payment where they cover a period of no more than 12 months (ending before 1 July 2018). Otherwise, the prepayment rules are the same as for non-SBE taxpayers.
The kinds of expenses that may be prepaid include:
- Rent on business premises or equipment.
- Lease payments on business items such as cars and office equipment.
- Interest – check with your financier to determine if it’s possible to prepay up to 12 months interest in advance.
- Business trips.
- Training courses that run on or after 1 July 2018.
- Business subscriptions.
This is some of the information we will need you to bring to help us prepare your income tax return:
- Stocktake details as at 30 June.
- Debtors listing (including a list of bad debts written off) as at 30 June. Note: In order to claim a deduction, the debt must be written off on or before 30 June.
- Creditors listing as at 30 June.