Get EOFY2020 Ready with these 6 Small Business Concessions

It’s time to get EOFY2020 ready. With less than a week to go, time is of the essence to get on top of your tax planning. Whether you’re using a tax agent or doing it on your own, you need to be prepared, so:

• Get all your business records in order
• Work out your income verse expenditure to help determine what can be claimed as a valid deduction

Now’s also the time to take advantage of the many small business concessions introduced during COVID19. Be sure to check if any expenses qualify for these concessions.

To make it easy for you, we’ve compiled a list of 6 small business concessions that can help you reduce your tax bill for EOFY2020. As a broad indication, to qualify, your anticipated turnover for this period, must be less than $10M.

Prepaid Expenses

Do you have any expenses for next year that can be paid in advance? Pre-paying for next year’s expenses before 30 June means you’ll be able to reduce your EOFY2020 taxable income. Consider including things like rent, subscription or registration fees, insurance or advertising costs. But remember, 12 months is the maximum time you can prepay these expenses.

Instant Asset Write-off up to $150,000 ex GST

During Covid19, the instant asset threshold has been lifted to $150,000 ex GST.  It allows you to claim up to $150,000 deduction per asset as long as it was first used, or installed ready for use, between 12 March and 30 June 2020. It can be applied to multiple business assets – both new and second hand. This means that eligible businesses can immediately write-off multiple assets provided each costs less than $150,000.

A number of eligibility criteria apply and each should be considered on their merit.

For assets used in both a business and private capacity, only the business portion can be claimed.

And a final word of warning. The instant ssset write off may appear attractive right now, you do need to decide whether the investment in the asset is actually worth it. Can your cashflow handle it as you don’t want to incur unnecessary debt that cannot be serviced long term.

Whilst the instant asset write off is available to larger businesses with turnover less than $500m, it is only available to them for EOFY2020.  From 1 July 2020 only small businesses with an aggregated turnover less than $10m will be eligible, with the limit reduced to $,1,000 per asset.

Accelerated Depreciation

Accelerated depreciation allows businesses to accelerate their depreciation deductions on the purchase of certain NEW depreciable assets only. To benefit from this concession, the asset must be new.

The new asset must have been acquired or installed on or after 12 March 2020 until 30 June 2021.

Like the instant asset write off, there is no limit on the number of eligible assets that you can apply accelerated depreciation to. Sadly, it is one or the other. You cannot claim the instant asset write off and accelerated depreciation on the same asset.

Simplified Rules for Stock Take

The ATO has allowed for less stringent stock take procedures over Covid 19. For EOFY2020, the rule of thumb is quite easy.

If you estimate that the difference in your opening and closing trading stock for 2019–20 is $5,000 or less, you will not need to do a stock take. You can just report the same amount for your opening and closing stock in your tax return.

If however, your estimated difference is more than $5,000, then, you will need to undertake a formal stock take and report on it as normal.

Start Up Relief – Deductions for Professional Expenses

Start-ups, especially early stage start-ups who have not been able to benefit from many of the pandemic support packages are able to get a measure of relief. If turnover is less than $10 million, some start-up expenses like professional, legal and accounting advice, and government fees and charges could be claimed in this financial year.

Superannuation

If  you  paid your June Quarter superannuation before 23 June, you are eligible for a tax deduction this financial year. If not, it will fall into next financial year.

In Summary

Good record keeping is essential. Especially if you want to take advantage of these concessions. Not only will it keep you on track, but it will also make your EOFY2020 submission a breeze.

Still unsure how you can apply these small concessions to your business? Then, it is always good practice to seek professional advice from your tax agent or account before your submission.