Primary Producers Planning Options & Changes To Depreciation For Small Business

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Small Business Accelerated Depreciation

As the end of the financial year approaches we shift our focus to strategies that can effectively help minimise taxation. Over the past two years one of the most popular and effective measures of minimising your tax bill has been using the Small Business Accelerated Depreciation measures that were introduced in May 2015, sadly these measures come to an end 30 June 2017 so time is of the essence.

These measures currently allow small businesses (annual turnover up to $2 million) to claim an immediate write off for assets costing less than $20,000 acquired after 7:30pm on 12 May 2015 to 30 June 2017. From 1 July 2017, this $20,000 threshold reverts to the historical $1,000 threshold.

What action is required before 30 June 2017?

To utilise the current $20,000 threshold the asset must be installed ready for use in the business. This means you must physically have the asset in your possession on or before 30 June 2017 – merely having an invoice and the asset ordered will not suffice.

Measures affecting Primary producers

Another measure introduced along with the Small Business Accelerated Deprecation measures was accelerated depreciation on certain assets for primary producers. Primary producers can claim an immediate deduction for water facilities and fencing, and a three-year write-off on fodder storage assets, acquired after 7:30pm on 12 May 2015.

What action is required before 30 June 2017?

The good news for primary producers is these measures continue indefinitely and differ to the Small Business Accelerated Depreciation measures in that an expense only need to be incurred to claim a deduction – there is no requirement for the asset to be installed ready for use. An expense is incurred when a legal obligation to pay arises, usually when an invoice is issued or asset delivered.

Farm Management Deposits (FMDs)

A final measure for primary producers (who meet certain eligibility requirements) to keep in mind are the changes to the Farm Management Deposits Scheme which commenced on 1 July 2016, these are:

  • The doubling of the cap on deposits from $400,000 to $800,000
  • Re-establishment of an early access trigger during times of drought
  • Allowing FMDs to be used to offset the interest cost on primary production business debt (offset accounts)

While these measures remain an effective measure to reduce taxation no investment decision should be based on taxation savings alone. It is recommended that you speak with your adviser before making any investment or FMD decision to determine if either approach is suitable for your situation.

By: Danny McAuley
Email: dom@accession3.com

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