Small businesses not taking opportunity to make tax deductions this EOFY

With two thirds of small business owners claiming they want to reduce their tax bill, a huge majority of them aren’t taking the steps to do so.

According to a study conducted by both Officeworks and H&R Block, 84% of Aussie small businesses aren’t using the instant asset write off, even though the threshold has been raised to $30,000 this financial year.

“The instant asset write-off has recently been made even more generous, with all assets costing up to $30,000 each available for instant write off. In addition, thousands of additional businesses now qualify, as the qualifying turnover threshold has been raised to cover any business with a turnover up to $50 million,” Mark Chapman, Director of Tax Communication at H&R Block said.

“So, any small or medium business that’s looking to improve productivity, efficiency and profitability can now lock in an immediate tax deduction for items as diverse as laptops, office furniture, stationery, cars and coffee machines.”

The survey also found that only a quarter of respondents viewed the end of a financial year as a time for financial growth for their business.

What is the instant asset write off?

The instant asset write off is an initiative that enables small businesses to claim immediate deductions on business purchases up to $30,000 (according to the changes made this year).   

What this means is, businesses that have a turnover up to $10 million, and now businesses with a turnover between $10 and $50 million, can claim deductions on purchases up to $30,000 if they are bought, and used or installed between 2 April 2019 and June 2020.  

So, say your office needs new chairs, desks, storage units, or even a fresh coffee machine, each item that is individually under the threshold amount could potentially qualify as an instant asset write off.  

Keep in mind though, there are different conditions for purchases made before 2 April 2019 as businesses with a turnover under a $10 million can still claim the instant asset write off on some items.

Top EOFY tips for small businesses  

  • Make any large purchase before 1 July: If you’re in need of something like a new car for your business, it’s best to seal the deal before the end of the financial year so that you can claim the instant asset write off and see deductions sooner.

  • Review your fixed assets: EOFY is a great time to look back on the depreciation and disposal of your fixed assets over the year with your accountant. Make sure you keep an up to date record of all your purchased assets.

  • Get all your paperwork in order: Over the financial year you’ve probably got quite a bit of paperwork that you’ll need come tax time. Make sure you are prepped and ready with everything you need, so follow up on all quotes, invoices and billable expenses. If you are unsure on what you’ll need the ATO has an EOFY checklist for businesses.

  • Complete any necessary stocktake: According to the ATO, if you are a business that has a turnover of under $10 million (and you buy and sell goods) you need to conduct a stocktake if the estimated difference between you stock at the beginning and end of the financial year is more than $5,000. Note that you may be able to claim a deduction on buying, maintaining, repairing and selling stock, so have a chat to your accountant.

  • Set yourself up for the next financial year: If you always find yourself scrambling to get yourself together before tax time, there’s no time like the present to break that habit. Keep a running report of business performance, keep your books up to date with regular data entry and don’t just pull up a profit and loss statement or balance sheet at tax time, check it whenever you can.

  • Do a banking audit: Do you feel that you’ve been paying too much in fees and interest across your business banking products in the last financial year? Use the start of a new one to shop around for a better performing business loan, bank account or business credit card, you may find a better deal.

RELATED ARTICLE: 7 EOFY money deals you won’t want to miss

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