A major sweetener in Treasurer Joe Hockey’s budget unveiled on Tuesday evening was a two-year tax break for small business people.
Designed to get Aussies spending, it makes certain business-related purchases fully and instantly tax deductible between May 13 this year and June 30, 2017.
And Mr Hockey isn’t even all that concerned about you rorting his $1.75 billion scheme.
“People aren’t going to spend money on their business if it’s not going to make them a dollar,” he told ABC radio on Wednesday when asked if he was worried people would claim plasma TVs and office couches.
So here’s how you can take the Treasurer to the cleaners, with his blessing.
Step 1 — Apply for an ABN
Anyone with an Australian Business Number (ABN) whose enterprise turns over less than $2 million a year is eligible.
Click here to apply for a business number, but keep in mind that if you aren’t carrying out an actual enterprise, you’ll be knocked back.
If you already have an ABN, read on.
Step 2 — Buy something(s)
You can buy any new or second-hand physical item costing less than $20,000 that directly relates to your business, such as a new work vehicle.
Mr Hockey also gave the examples of kitchen equipment, tables, chairs, tools, computers and machinery in his speech on budget night.
“Anything under $20,000 is immediately 100 per cent tax deductible from tonight,” he said.
If what you want costs more than $20,000, never fear. You are allowed to assume that the asset depreciates 15 per cent in the first income year and at 30 per cent per year after that. Once its falls below $20,000, you can deduct it.
Intangible things like marketing costs do not qualify.
You’ll be able to deduct the cost of the purchase from your business’ taxable income.
As a result, you’ll get back a percentage of the purchase’s value in the form of a smaller tax bill.
(Sadly, the tax man doesn’t actually pay the entire $20,000 bill).
Step 4 — Do it again
You can claim as many products under $20,000 as you want.
Just keep in mind that this tax break expires on June 30, 2017.
Step 5 — Hope and pray for a friendly Senate
Mr Hockey said the scheme began at 7:30pm on budget night (May 12), but it still needs to be ratified by the Senate.