Accelerated Depreciation: Best business practice
Steve Sykes, 15 May 2015
Small business stimuli has always got to be encouraged and from those I have spoken to who qualify, the Accelerated Depreciation seems like it will provide the stimulus the Treasurer had hoped for.
Remember – it is not a rebate – it simply means you can write off the full value of an asset under $20,000 – in one go – instead of over a period of years. Put simply, if a tax payer made a $40,000 profit in the 2015/16 financial year – and if they also acquired $40,000 worth of qualifying equipment, then they would pay no tax, thus saving $40,000 at 28.5% (new small business tax rate for next year) or $11,400 in tax that they otherwise would have had to pay. This means you have to be in profit to benefit, or wait until you are.
Given that most people will want to finance rather than use working capital, it is worth looking at how to do this.
Rental, lease or cost per usage type products do not qualify. Instead, buyers will need finance products whereby the end-user acquires ownership upon invoice.
The most popular will be a Chattel Mortgage as it will qualify to receive the benefits of Accelerated Depreciation because the end-user owns and is therefore invoiced for the equipment.
Chattel Mortgages have traditionally been less user-friendly and have usually attracted Document Fees and sometimes monthly Invoice Processing fees, but regardless of these extra costs, they will still represent significant tax savings because of this new stimuli.
And yes, SER is Chattel Mortgage ready.
Managing Director, S.E. Rentals
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