On the 6th of October 2020, the treasurer Josh Frydenberg, presented the COVID-19 delayed government federal budget for 2020-21. Due to the urgency of this legislation, the budget was immediately passed in its entirety on the 14th of October, 2020.
The Budget highlights were:
- Personal Tax Rate changes brought forward
- Business Tax Incentives including:
- Company Loss Carry Back
- Instant Asset Write Off Changes
- Wages Subsidies
This blog focuses on the instant asset write off and taking advantage of its recent changes to improve your online presence. From now on, all eligible businesses will be able to immediately expense the entire value of business plant and equipment, including websites purchased, as a tax deduction. Previously, the immediate write off threshold was capped at $150,000 – now it is unlimited until 30 June 2022.
This means that eligible businesses will no longer have to depreciate large plant and equipment purchases for over several years. The tax benefit will be 100% available in the year of purchase. This is applicable to all businesses with up to $5B turnover, which means that over 99% of businesses in Australia will be eligible.
The assets must be new but can include the cost of an improvement to an existing asset. Importantly, small businesses with aggregated turnover of less than $50 million can also apply this rule to second hand assets. Refer to this link for more information.
As an experienced Accountant, my personal perception regarding businesses going through the Covid 19 period is they can either choose to adapt or to contract. A number of my clients chose to adapt by going digital, which involved improving their digital footprint through upgrading their website, refining their marketing materials and changing their overall strategy towards being online.
A perfect example of the success of this strategy was a florist client of mine. She had a number of corporate clients which maintained a large percentage of her sales over the last few years. Because of the Covid period, most corporate events were delayed, weddings were postponed and the current corporate clients consequently stopped ordering. With this in mind, the customer turned to social media – Instagram and Facebook. She also updated their website to allow more products to be listed online knowing that her spend would be fully deductible. Through this strategy, the florist was able to replace all corporate sales with personal sales of flowers. Going online not only sustained her business, but also grew the business during the Covid period. Apart from that, she was also able to reduce her tax bill this year so she had a buffer as we move forward into the next year.
No matter what industry you’re in, investing in your online presence is one of the most rewarding decisions that you could ever make as a business owner. In this digitally-driven world where people would rather look for goods and services through their phones, tablets or laptops, businesses can’t afford to disregard the importance of being visible on the web. Imagine people in your area searching online for the exact products/services that you’re offering. However, if you don’t have a website or social media presence, they could end up finding your competitor instead of you. Without a strong online visibility, you are not only missing the chance to introduce your business to a potential customer. You are also losing a great opportunity for business growth.
With the recent changes on the rules governing instant asset write-off, there’s no better time to pay more attention to having a more powerful presence online.
Disclaimer: You should always discuss these financial matters with your Accountant as what’s provided is general in nature and may not be relevant to your personal circumstances.