Thursday, August 29, 2013

Major Tax Benefits may be Lost after September 7

As you are all no doubt aware, there is a Federal election to be held on Saturday, 7th September 2013.

The polls would indicate that there is a probability of a change of government to the Coalition.

There were a number of tax incentives introduced by the Labor government linked to the introduction of the carbon tax. These incentives were specifically aimed at small business – defined for the 2014 financial year as those businesses that have an annual turnover of under $2m, either in the prior financial year (2013), projected for the current financial year as assessed now (2014) or actual for the 2014 financial year, as assessed at the end of the 2014 financial year. These entities include partnerships, trusts and companies who are termed Small Business Entities (SBE).

The Opposition have announced that should the Coalition form Government after the election that they will repeal the following tax incentives that are currently available for SBEs:

1)      The immediate tax deductibility for asset purchases costing less than $6500, net of GST.

2)      The immediate tax deduction of $5000 of the cost of a motor vehicle. The net balance after the initial $5000 deduction is added to your General SBE pool, to be written off 15% in the year of purchase and 30% each subsequent financial year, subject to an adjustment for private use.

3)      The ability to “carry back” a loss made by a company in one year against profits made in the prior year (can be up to 2 years, depending on the financial year), effectively enabling the company to get a refund of part or all of the company tax paid in the relative prior year.

At this stage it is unknown firstly whether there will be a change in Government, and secondly when these changes will be effective from should there be a change.

My suggestion is that if your business is a SBE, and you have been considering purchasing either plant, fixtures or equipment costing  less than $6500 or a motor vehicle that is at least partially for business use, in your business entity, you should give serious consideration to purchasing them prior to the election – the tax benefits will be substantially enhanced!

If you are at all in doubt, I suggest you contact your accountant.


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