Additional deductions for small businesses when acquiring assets

If you are a small business with a turnover of less than $2 million in sales (including related businesses) you are able to access some additional deductions.

Plant & Equipment

Assets with a value of less than $6,500 can be immediately written off in the year of purchase. You can write these assets off providing that they are installed and ready for use prior to the end of the financial year.

Motor Vehicles

Accelerated depreciation deductions now apply for motor vehicles costing more than $6,500 purchased after 1 July 2012 by a small business. (Vehicles costing less than this are 100% deductible in the year of purchase.)

In the first year of purchase, you are entitled to claim an immediate deduction for $5,000 + 15% of the balance of the cost.

Some Vehicles are not subject to Fringe Benefits Tax

If your business provides a car to employees and the vehicle is used for private purposes, then this private use is subject to Fringe Benefits Tax. As there are some exemptions for other types of vehicles, businesses can potentially take advantage of some opportunities:

Utilities, Panel Vans and Other Commercial Vehicles

An employee’s use of a utility, panel van or other commercial vehicle (not designed to carry passengers) is exempt if the employee’s private use is limited to:

1. Travel between home and work
2. Travel that is incidental to travel in the course of duties of employment
3. Non-work related use that is minor, infrequent and irregular.

Dual cabs

Dual cabs qualify for the work-related use exemption only if either:

1. They are designed to carry a load of one tonne or more, or more than eight passengers or
2. While having a designed load capacity of less than one tonne, they are not designed for the principal purpose of carrying passengers.

Each year, the Australian Taxation Office publishes a list of vehicles which are eligible for this exemption. If you are considering purchasing a vehicle then please contact our office and we can check this for you.

Source: Australian Tax Office

Change to how Individual Income Tax Refunds are paid by the Tax Office

From 1 July 2013, individual income tax refunds need to be deposited into an Australian bank account when lodging via the electronic lodgement service (ELS).

If you are due a refund, we will be requesting from you the bank account into which you would like the refund paid.

Sellers beware: ATO targeting eBay sales!

The Tax Office have advised that as part of their data matching activities, they have identified members of online selling sites such as eBay and Gumtree who have annual sales of goods and services of a total value of $20,000 or greater.

The Tax Office will be contacting businesses who are identified “as being at risk of running part of their business off the books or in other ways not reporting all their income. We will encourage them to make a voluntary disclosure of any under-reported amounts”.

Recent cases have highlighted the importance of understanding whether you are running a business or if the activity is merely a hobby.

If the activity is a business, then you would require an Australian Business Number (ABN) and may need to be registered for GST. You would need to declare all sales as income but will be entitled to offset any expenses you may have incurred. If you make a loss from the activity, then there is potential to use this offset to reduce your taxable income.

Please contact us if you would like further information on how to determine whether you are conducting a business or a hobby.

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