EOFY tax deductions for small businesses

EOFY Tax Deductions: Are You Maximizing Your Benefits?

Alright, let’s get into it. The Federal Government has given us a gift with the extension of the instant asset write-off scheme. If your business turnover is up to $10 million, you can now deduct the full cost of eligible assets.

But there’s a catch – you’ve got to have those assets installed and ready to go by 30 June 2024.

And there's more. The temporary full expensing scheme has also been extended.

For this, your assets need to be first used or installed between 6 October 2020 and 30 June 2023. But remember, don’t go on a shopping spree just to get a tax benefit.

Make sure the asset serves a real business purpose.

Instant Asset Write-Off: What’s the Deal?

As per the recent Federal Budget for 2023-2024, the instant asset write-off threshold has been bumped up to $20,000. This is great news if you’re running a small business with a turnover of up to $10 million.

You can immediately deduct the full cost of eligible assets under $20,000, provided they’re first used or installed between 1 July 2023 and 30 June 2024.

This boost is part of the post-pandemic recovery efforts. However, note that this doesn’t apply to assets held or installed after 6 October 2020—those fall under the temporary full expensing rules.

Temporary Full Expensing Explained

Temporary full expensing is a bit more expansive. It covers all eligible assets acquired and first used or installed by 30 June 2023, for businesses with an annual turnover of less than $5 billion.

But here’s the kicker: the asset must be in use or ready for use by that date. Otherwise, you’ll spread the tax deduction over several years.

Eligible Assets for Temporary Full Expensing

Let’s break it down:

• Turnover under $50 million:

  • New assets: Eligible

  • Second-hand assets: Eligible

  • Improvements to assets: Eligible

• Turnover between $50 million and $5 billion:

  • New assets: Eligible

  • Second-hand assets: Ineligible

  • Improvements to assets: Eligible

Should You Spend Before EOFY?

Mark from our team suggests that small businesses should consider making the most of these schemes, especially if you're looking to upgrade equipment like laptops, office furniture, or even company cars.

But here’s the deal: only spend if you’ve got the cash flow. Don’t stretch your budget just to chase a tax deduction.

Buying Assets Just for Tax Benefits: Good or Bad?

Buying assets purely for a tax benefit? Not a smart move. If your business needs an asset, sure, go ahead and buy it before 30 June 2023 to maximize your deduction.

But remember, you can only claim the tax on the purchase, not the entire cost.

For example, if you operate through a company, you can claim 25 cents for every dollar spent, meaning the company still pays 75 cents.

Final Thoughts

Don’t get tempted to make unnecessary purchases just for tax relief. Plan your EOFY spending wisely and ensure it’s genuinely beneficial for your business operations.

For more detailed info on eligibility and inclusions, check out the ATO website.

There you have it, folks. Make sure you’re getting the most out of your EOFY deductions without falling into unnecessary spending traps.

P.S. Need a hand navigating EOFY deductions or figuring out the best finance options for your business?

Give us a call. We’re here to help you make smart financial moves without any stress.