Budget Boost for Production Firms

Instant Write-off Fuels Expansion

From now all equipment valued at less than $20,000 can be purchased with a 100% tax writeoff by small business. This is excellent news from the Australian Government, and is a boon for the sound, lighting and vision market where the vast majority of single items are priced under 20 grand.

Normally capital expenditure (capex) items are depreciated over some years. Being able to write off at purchase means profits can be reinvested without additional tax. An example would be an end of year profit, say of $100,000, can now be spent to reduce the profit to zero.

The new measure announced in the budget runs until June 2017 and applies to businesses with turnover under 2 million. The immediate writeoff provision galvanized small business across Australia. Now the provisions appear to make it even better for firms buying sound, lighting and vision equipment.

Sydney accountant Kieran Martin of Watkins Coffey Martin told CX that equipment currently partially depreciated may also be written off “subject to the provision getting legislated”. At presstime it appeared the measure would pass in the Senate.

CX also understands, from other specialists we contacted, equipment financed under a chattel mortgage, where the equipment is ‘on the books’ would also be subject the writeoff.

A chattel mortgage can result in an immediate GST refund, producing the tantalizing possibly of a 100% writedown on the equipment, and a further 10% refund of the GST component – all within this financial year. The outlay would be the first payment on the finance deal, which itself would be considerably less than the GST refund.