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Small opportunity to save some tax

Part of the governments COVID assistance to business was the increase in the threshold for immediate write-off of tools and equipment from $500 to $5,000 for all purchases between 17 March 2020 and 16 March 2021. 

This means that you get immediate deductibility for what would, under normal circumstances, be the purchase of an asset. 

The impact of this is best explained by an example:

Suppose that you need to buy a new item of plant or equipment, a drill press or laptop computer or coffee machine for the office. The cost is $4,000 and you buy it in January. You reduce your 2021 taxable income by $4,000 and save tax of $1,320. Under the prior rules the reduction in income would have been a maximum $500 depreciation claim (depending on the type of asset) and tax saved of $165.

With this in mind, you may wish to review the timing for any purchases you intend to make in 2021. Maybe it is time for that new coffee machine??

Note, there are some technical qualifications – the most important one being that the $5,000 limit is per complete asset.

Photo Bruno Kelzer - Unsplash