The 2016 Budget saw another tax cut for incorporated small businesses (down to 27.5 per cent from July 1). There was also a rising tax discount for unincorporated small businesses (currently five per cent, it will jump to eight per cent on July 1) 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 per cent average increase in sales revenue after automating their marketing.[i]
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.
Need money to invest in your small business?
Consult with your financial advisor before you buy an asset. If your business is not making a profit, then the instant tax write-off deduction is of no use to you. Talk to Prospa about getting a loan that will help grow your small business into a larger one.
PS: 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.
 “Roy Morgan Single Source, July 2014 – June 2015”, December 2015