Posted on June 17, 2020 by Christabelle Harris
The Australian Government continues to support small business with the announcement that it will extend the $150,000 instant asset write-off for six months to 31 December 2020.
Australian businesses with annual turnover of less than $500 million will be able to take advantage of this extended timeframe to invest in assets to support their business as the economy reopens and Coronavirus health restrictions continue to be eased.
Without the extension, the instant asset write-off threshold of $150,000 would have reverted to the $1,000 threshold and be accessible only to small businesses with a turnover of less than $10 million after 30 June.
Instant Write-Off for Small and Medium Businesses
Small and medium businesses are able to claim an immediate tax deduction for each asset that costs less than $150,000 (net of GST credits), to the extent the asset is used for tax-deductible purposes.
This new threshold of $150,000 applies for a limited time only for depreciating assets first used or installed ready for use between 12 March 2020 and 31 December 2020.
Assets that cost $150,000 or more will not be eligible for the immediate deduction but they may be eligible for the backing business investment (BBI) discussed later.
Small and Medium Business Entities
Only small and medium businesses that meet the definition of a small business entity (SBE) or medium business entity (MBE) will be eligible for the instant write-off.
SBEs are broadly all those businesses with an aggregated turnover of less than $10m. MBEs are broadly all those businesses with an aggregated turnover of $10m or more, but less than $500m.
Aggregated turnover includes the turnover of connected and affiliate entities and persons.
New and Secondhand Assets
Both new and secondhand assets can be eligible for the instant write-off.
Are all Assets Eligible?
Most tangible assets that decline in value over time will be eligible for the instant write-off, except a small number of exclusions. Among the excluded assets are trading stock items, land, non-farming buildings and capital works, horticultural plants, water facilities, fodder storage assets and farm fencing. These items all have their own tax treatment.
Motor vehicles will be eligible assets however the car cost limit ($57,581 for 2019-20) will still apply to cap deductions for ‘cars’, being a vehicle mainly designed to carry passengers and designed to carry a load of less than one ton and fewer than nine passengers.
Backing Business Investment (BBI) Deduction
There is another tax incentive for small and medium businesses that acquire assets that do not fit within the cost limit or time frame of the instant asset write- off.
Small and medium businesses are able to claim an immediate deduction of 50% of the cost of each new asset located in Australia on installation, with existing depreciation rules applying to the balance of the asset’s cost.
The asset must be a new asset and must be first held and first used or installed for a taxable purpose between 12 March 2020 and 30 June 2021.
The BBI will, therefore, last one year longer than the increased instant asset write-off.
There is no cost limit, however, the usual car limit will still apply to cap deductions for a car.
The BBI applies to the same types of assets as the instant asset write off, however, unlike the instant asset write- off the BBI only applies to new assets (i.e. not a second-hand asset).
An asset is not eligible if the asset was acquired before 12 March 2020 or there was a commitment to hold the asset before 12 March 2020 (e.g. a contract to acquire the asset entered before 12 March 2020).
The application of the above measures can deliver a big tax saving for businesses however there are a number of traps for businesses that are part of a larger group. We encourage anyone thinking of taking advantage of the increased write off limits to contact us on (08) 9316 7000.
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Posted on June 8, 2020 by Tashia Jayasekera
The Government has announced two new grants aimed at promoting investment in the WA residential market and stimulating jobs in the construction industry. These Building Bonus Package grants are available for people who enter into a contract to build a new home on vacant land or purchase a new home being constructed under a single-tier strata plan. The grant totals $20,000 for eligible participants. This is a flat amount regardless of how much you spend on building a new home.
The Building Bonus Scheme starts on 4 June 2020 and ends 31 December 2020. There is no cap on the purchase price or value of the contract nor is there any means testing for the grant. Multiple grants can be paid to the same applicant on separate transactions that meet the criteria for each grant.
The grant is available to owner occupiers, investors, Australian citizens, foreign persons, natural persons, corporations, and trustees. You do not need to be living in WA to access the grant. The grant is paid directly to the applicant rather than to the bank (if under a loan). Contracts signed before 4 June 2020 are not eligible for the Building Bonus grant.
Building a new home on vacant land
To be eligible for this grant, you must be the registered owner of the vacant land on which the home will be built. The grant will be paid to all registered owners unless there is written authorization to pay another person. This authorization must be provided by all the registered owners.
One grant will be paid in relation to each vacant lot of land regardless of how many homes will be built on the land.
The criteria include:
- The home to be constructed must be a detached residence i.e. it cannot share walls or roof structures with any other buildings.
- The home cannot be for mixed use, commercial purposes or short stay accommodation.
- The land must be vacant. If the land already has a building on it, the grant will only be paid after the building is demolished.
- The building contract must be in the name of the registered owner of the land.
- The contract must be entered into between 4 June 2020 and 31 December 2020.
- Construction must commence within six months of entering into the contract.
- If you are an owner builder, you must commence construction of the new home on the land between 4 June 2020 and 31 December 2020.
Applications for the grant can only be submitted once construction has commenced i.e. when the foundations of the home have been laid. Applications must be submitted by 30 June 2021.
Purchasing a new home being constructed under a single-tier strata plan
To be eligible, you must be the registered owner of the land on which the new home is built and you must be the buyer named in the off-the-plan contract. One grant will be paid in relation to each dwelling.
The criteria include:
- The home to be constructed must be part of a single-tier development.
- The home cannot be a replacement transaction. A replacement transaction is an agreement between the same parties as the cancelled transaction that is substantially similar in effect to the cancelled transaction.
- The home cannot be a completed dwelling that is held by the developer or another person.
- The home cannot be part of a refurbished development including those where the original property is extended or renovated.
- The contract must be entered into between 4 June 2020 and 31 December 2020.
- Construction must commence within six months of the contract date however you may apply to the Commissioner to extend the commencement date.
You may apply for the grant once construction has been completed and you are the registered owner of the property.
Access to the Building Bonus grant does not impact access to both State and Commonwealth grants, the existing $10,000 First Home Owner Grant and the first home buyer transfer duty concession for eligible first homebuyers.
If any of the new building packages impact you or you would like to discuss eligibility and application, please contact one of our Team on (08) 9316 7000.
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