How to invest the instant tax write-off in your small business
The 2016 Federal Budget saw another tax cut for incorporated small businesses (down to 27.5% from 1 July). There was also a rising tax discount for unincorporated small businesses (currently 5%, it will jump to 8% on 1 July), as well as the announcement that the $20,000 tax write-off on business equipment will continue for at least another year. Given all this, Australian small business owners should have extra money available to plough back into their enterprises. Here are some ways you can invest that instant tax write-off to grow your business.
Automate your systems
To boost revenue and profits, a small businessperson almost always needs to scale up. Technology has made it easy to automate activities such as accepting bookings, sending out invoices and rostering staff. If you haven’t done it already, now is the time to hire an IT consultant and investigate the offerings of the likes of Salesforce.com, QuickBooks and Trello. While the return on investment will obviously vary, automation can have a big impact on the bottom line. A 2015 survey found businesses saw a 34% average increase in sales revenue after automating their marketing.
Buy that kit you’ve been eyeing up
The instant tax deduction for business equipment under $20,000 that was introduced in last year’s budget for businesses with turnover under $2 million has been extended from FY17 to businesses with turnover under $10 million. There has never been a better time to update your equipment and ensure your processes run more smoothly.
Tradies should consider upgrading their tools and vehicles while retailers should look into updating their POS systems to keep on top of advancements in payment systems, such as ANZ mobile pay. Examples of qualifying items include:
- IT hardware including desktop computers, printers, scanners, photocopiers
- Office and shop fittings including new café tables, display and shelving, kitchen equipment, signage, air conditioners
- Work vehicles including utes, forklifts
- Tradesmen’s tools including machinery, lathes, hoists, plant and other equipment, sheds and storage containers for equipment.
If you don’t want to invest in assets – invest in people
Not every task can be automated – many tasks continue to need human input. While the asset write off doesn’t apply, the Government’s $840 million PaTH [Prepare-Trial-Hire] program comes in handy. It provides an upfront $1000 payment to employers for taking on an intern. There’s also a $6500–$10,000 “Youth Bonus wage subsidy” that kicks in later on. Recruiting and training new staff members obviously costs you both time and money.
However, in a well-run business, the extra profit generated by an employee can be two or three times the total cost of employing them. Hiring an intern, apprentice or part time worker may free you up to take care of administrative matters. It may also allow you to expand your business operations, for example, a hairdresser who takes on an apprentice can extend their opening hours on Thursday nights and use the extra set of hands to take advantage of a consumer market who only has time to get their hair cut after work.
Consult with your financial advisor before you buy an asset.
If you’re considering purchasing business equipment or assets to make the most of the scheme, but concerned about disrupting cash ﬂow to do so, a small business loan from Prospa could be the answer.
If you use your vehicle for both personal and business purposes, here’s a guide to calculating the vehicle expenses you could claim as a tax deduction.View more
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