As a small business owner, any opportunity to save money is a welcome one. And this year, the Australian government has come up with a way to help small businesses keep more money in their pockets. The temporary full expensing and loss carry-back measures allow eligible businesses to immediately deduct the full cost of eligible depreciable assets until June 30, 2022. Additionally, if your business has experienced a tax loss in the 2019-2020, 2020-2021 or 2021-2022 income years, you may be able to use the loss to offset eligible tax liabilities in a prior year, which means a refund of tax paid in those years.
If you’re a small business owner wondering how to take full advantage of these measures, read on for our tips and strategies to maximize the $20,000 tax benefit.
1. Take stock of eligible assets
To maximize the tax benefit, you need to ensure that you are purchasing eligible assets. Eligible assets should be new and not previously used or owned by your business or the entity that you are associated with. These assets must be purchased between October 6th, 2020 and June 30th, 2022. Assets that cost $20,000 or more can be depreciated over time, so make sure you understand the rules around claiming the full benefit.
2. Get advice from your accountant
As with any tax or financial matters, it’s always a good idea to seek professional advice from your accountant. Your accountant can help you understand the rules around the tax benefit and advise you on the best way to maximize it for your business.
3. Identify tax losses that can be carried back
If your business has experienced a tax loss, you may be able to use the loss to offset eligible tax liabilities in a prior year, which means a refund of tax paid in those years. It’s important to identify any tax losses that you can carry back to make the most of this benefit.
4. Consider making larger purchases
If you have been considering purchasing new assets or equipment for your business, now may be the time to do so. With the full expensing measure, you can immediately deduct the cost of the asset in the year it is installed or first used, rather than depreciating it over several years. This means that the more you spend on eligible assets, the greater your tax benefit will be.
5. Keep good records
In order to maximize the benefits of the $20,000 tax benefit, it’s important to keep good records of all eligible assets purchased and tax losses carried back. This will make it easier for your accountant to prepare your tax return accurately and ensure you receive the full benefit.
In conclusion, the temporary full expensing and loss carry-back measures provide a great opportunity for small businesses to save money and invest in their growth. By taking stock of eligible assets, seeking professional advice, identifying tax losses, considering larger purchases, and keeping good records, you can maximize the $20,000 tax benefit and keep more money in your pocket.
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