Should you spend $20,000 to get a tax deduction?

by She Will Shine on 03-07-2015 in Small Business, Finance
Should you spend $20,000 to get a tax deduction?

Remember - it's a deduction, not $20,000 in your pocket.

In the latest budget the federal government announced an instant write off for assets costing $20,000 or less. This isn’t the first time this has been available, the previous government had a $6,000 write off available...

So what does it mean for you and your business?

If you buy and start to use an asset in your business (after 7.30pm on the 12 May 2015 and before 30 June 2017) that costs less than $20,000 you will be able to claim the whole amount as a deduction. Also, if you use the small business asset pooling rules and the pool balance is less the $20,000, you can claim the whole amount as a deduction.

The important thing to remember is it is a *deduction* – you won’t get a refund of $20,000! The most tax you can save using this measure is $9,700 – and that is if you as an individual are on the highest tax bracket. For most businesses the tax savings are more likely to be around the $6,600 mark. Still, not to be sneezed at and if you have a tax problem and need new equipment it's definitely worth taking advantage of.

Another point to remember is that this is "accelerated depreciation". Businesses have always been able to claim a deduction for assets but it has been spread over a number of years.  As an example, a car is claimed over 8 years if it isn’t pooled, or about 4 years if it is pooled. This measure brings all those deductions into one year. Instead of getting the tax benefit over the lifetime of the asset you get it all up front.

Lastly, the most important consideration is can your business afford to spend $20,000? Although you may have a profitable business it doesn’t necessarily translate to having cash to throw around. This measure applies even if you finance the purchase.

For specific advice on your tax planning contact your accountant.


About the author

Kathryn Harris is a tax geek at Harris Business Solutions. With a Graduate Diploma of Advanced Taxation and being one of the few women Chartered Accounts in Victoria she knows her stuff.

Kathryn also loves cloud applications. She is a Certified Xero consultant and Payroll Specialist as well as being a Xero add on guru. As a Fellow of CPA Australia she knows about business too.
Leadership and lifelong learning is something Kathryn is passionate about. She has completed most of her study while raising a young family and understands the struggle of juggling commitments.
Kathryn is currently developing a workshop for women to develop confidence and leadership skills. Her first book is also due for release in September - Pocket Guide to Becoming a Business Wonder Woman. It is a short guide for women starting, running and exiting a business.
If you would like more info about Kathryn, or to have her speak at your next event please contact her via

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