June’s always a big time of year for ute sellers and tool retailers, as tradies spend up big on work equipment to make the most of tax-time deductions. If you’re tempted to drop a lot of cash this weekend before the end of financial year, make sure you know the ins and outs of the instant asset write-off—and what you can really expect to get back in your return.
What can you write-off?
In its 2015 budget, the Federal Government announced a new scheme allowing small businesses to straight away deduct the full value of asset purchases worth up to $20,000. Before this was introduced, immediate deductions were only available on assets up to $1,000 in value, while deductions on anything worth more than that had to be spread out over multiple years via depreciation claims.
Sounds good, right? If a little confusing. It’s called the instant asset write-off. And it’s on the table until 30 June 2017.
The main point to keep in mind if you’re thinking of taking advantage of the higher threshold is that it’s not a cash-back offer. The instant write-off means you immediately get back all the tax you’ve paid on an asset, after GST. Per $20,000 purchase, you might be looking at a deduction of $5,000 – depending on the tax bracket you’re in. Tools Trades Toys has a great run-down on this.
Some other things to keep in mind: the write-off applies to second hand as well as new assets, and it works on a per-asset basis—so you can claim the instant write-off on several assets as long as each one comes in under $20,000. It’s available to businesses that turn over less that $2 million annually. It’s only claimable on work equipment, so if you’re sometimes going to use an asset outside of work, you’ll only be able to claim the ‘business use portion’ of it.
The Australian Tax Office has a simple overview here, and an info line you can call: 13 28 66.
In short, probably best to talk to your accountant before you splash out on a nice 4×4 this weekend.
What about other deductions?
Don’t forget to claim all your other work-related expenses. Small things add up! But you’ll need receipts—and, in the case of car and fuel expenses, a completed logbook.
Anything you spend as part of carrying out your work can be treated as an ‘expense’. Tradies can claim motor vehicle and travel spending, tools valued at up to $300, work-related phone bills, some education spending (see below), uniform and protective clothing costs, and any cleaning expenses for these. Watch the video above for info about travel cost claims, and make sure you check out the ATO’s work-related expense guides for building and construction employees and plumbing employees.
Can you deduct education costs?
Deducting your education costs is worth looking into. If you’re studying to get new skills for your current job, and the course you’re doing is shorter than 12 months, and you’ve paid for it in full before the end of this financial year, you may qualify for a deduction in your 2015/16 return. Check the ATO’s Self-education expenses calculator to find out if you’re eligible and to get an estimate.
Important: we’re building and construction trainers—not tax experts! The information in this article should be treated as a general guide. Talk to your accountant before making any tax-related decisions.