JobSeeker Update

The federal government has announced several changes to the JobSeeker payment beginning from Friday 25 September. This includes a reduction in the coronavirus supplement from $550 to $250 as well as some changes to eligibility.

Income Free Threshold

The income-free threshold for both JobSeeker and Youth Allowance will increase to $300 per fortnight, with recipients losing 60 cents for every dollar earnt above this threshold.

Asset Limits Reinstated

Recipients will no longer be able to access JobSeeker if they have assets worth more than $482,000, or $268,000 for homeowners. The Liquid Assets Test will also be reinstated, meaning people with more than $5,499 in savings must wait a set period before receiving payments.

Partner Income

Recipients will face a 27 cent reduction in their payments for every dollar their partner earns above $1,165.

Mutual Obligations

From Monday 28 September recipients must search for up to 8 jobs each month, however this change will not apply to Victorians.

If you need any assistance with these changes to JobSeeker, contact one of our accountants on 03 5612 1400.

References:

https://www.servicesaustralia.gov.au/individuals/news/job-seekers

https://www.servicesaustralia.gov.au/individuals/news/upcoming-changes-income-and-means-tests

Material contained in this publication is a summary only and is based on information believed to be reliable and received from sources within the market. It is not the intention of RGM Financial Planners Pty Ltd ABN 36 419 582 Australian Financial Services Licence Number 229471, RGM Accountants & Advisors Pty Ltd ABN 69 528 723 510 or RGM Finance Brokers Pty Ltd ABN 81 330 778 236 (RGM) that this publication be used as the primary source of readers’ information but as an adjunct to their own resources and training. No representation is given, warranty made or responsibility taken as to the accuracy, timeliness or completeness of any information or recommendation contained in this publication and RGM and its related bodies corporate will not be liable to the reader in contract or tort (including for negligence) or otherwise for any loss or damage arising as a result of the reader relying on any such information or recommendation (except in so far as any statutory liability cannot be excluded).

Liability limited by a scheme approved under Professional Standards Legislation.

Tax Alert September 2020

Many small business owners and sole traders will be breathing a sigh of relief following the extension of the JobKeeper scheme until March next year. At the same time, however, the ATO is stepping up its compliance activities.

Here’s a roundup of some of the key developments in the world of tax.

JobKeeper extended to March 2021

The government has announced its JobKeeper scheme, which was originally due to wind up on 27 September 2020, will now continue until 28 March 2021.

However, the $1,500 per fortnight payment will drop to $1,200 per fortnight from 28 September 2020 and to $1,000 per fortnight from 4 January 2021.

From 28 September 2020 businesses claiming JobKeeper will also be required to demonstrate they have suffered a decline in turnover using actual GST turnover rather than projected GST turnover.

ATO data matching support payments

The tax man is also starting to put JobKeeper support payments under the microscope using information from a new data matching arrangement with Services Australia (formerly Centrelink).

Information about JobKeeper payments reported to Services Australia for social security payment purposes will also be provided to the ATO. This will help the ATO identify people who are receiving both JobKeeper and social support payments.

JobKeeper still open to businesses

Although most businesses suffered an immediate decline in turnover when the COVID-19 crisis started, some businesses are finding things are tougher now the new financial year has commenced. The renewed lockdown in Victoria has also dealt a new blow to many businesses, so it’s worth remembering it’s still possible to apply for the JobKeeper subsidy.

If your small business has experienced a drop in turnover of more than 30 per cent and you meet the eligibility requirements, you are still able to apply for financial support through JobKeeper.

Expenses shortcut extended

For employees who have been using the shortcut method to calculate their working from home expenses, the good news is the end date for this scheme has been extended from the 30 June to 30 September 2020.

The ATO announced the new three-month extension and said a further extension may be considered.

Employees and businessowners who work from home between 1 March 2020 and 30 September 2020 on income producing activities can use the shortcut method to claim 80 cents per work hour for their home office running expenses. This all inclusive rate means you don’t need to calculate and record your actual running costs.

The shortcut is not a free pass, however, as the ATO recently noted this was one of the top three issues it was seeing in returns lodged for 2019-20. To avoid problems in this area, ensure you don’t double up on your shortcut claim by adding, for example, a depreciation claim for laptops and desktops.

Warning on TPAR requirement

The ATO is warning some small businesses may find they need to lodge a taxable payments annual report (TPAR) this financial year if they have started using contracted service providers due to the pandemic.

TPARs keep the ATO informed about payments made to contractors, with the requirement initially rolled out for the building, cleaning and courier industries.

The tax man is now cautioning restaurants, cafes, grocery stores, pharmacies and retailers who have started paying contractors to deliver goods to customers that they may be required to report.

If total payments received for delivery or courier services are ten per cent or more of your business’s total annual business income, you may need to lodge a TPAR for 2020-21.

No tax on ‘robodebt’ refunds

And some good news for taxpayers who receive a refund amount from Services Australia for a debt raised using averaged ATO income information – also known as a robodebt. You don’t need to include the money in your income tax return.

The ATO is advising no action needs to be taken regarding these refunds and tax returns for prior years should not be amended.

If you need assistance with your tax, contact one of our accountants on 03 5120 1400.

Material contained in this publication is a summary only and is based on information believed to be reliable and received from sources within the market. It is not the intention of RGM Financial Planners Pty Ltd ABN 36 419 582 Australian Financial Services Licence Number 229471, RGM Accountants & Advisors Pty Ltd ABN 69 528 723 510 or RGM Finance Brokers Pty Ltd ABN 81 330 778 236 (RGM) that this publication be used as the primary source of readers’ information but as an adjunct to their own resources and training. No representation is given, warranty made or responsibility taken as to the accuracy, timeliness or completeness of any information or recommendation contained in this publication and RGM and its related bodies corporate will not be liable to the reader in contract or tort (including for negligence) or otherwise for any loss or damage arising as a result of the reader relying on any such information or recommendation (except in so far as any statutory liability cannot be excluded).

Liability limited by a scheme approved under Professional Standards Legislation.

Housing Market: Shaken But Not Stirred

With Australia in a COVID-induced recession, residential property is not immune to falling economic activity. Yet housing prices are proving surprisingly resilient.

Only months ago, economists were forecasting a housing price slump of 20 per cent or more. Now, most have revised their forecasts to price falls of between five and 10 per cent.

The more optimistic predictions are due to Australia’s success at containing the coronavirus, the gradual lifting of restrictions and government stimulus aimed at keeping Australians in work. The most recent of these measures is the HomeBuilder package.

Housing stimulus

The Morrison Government’s HomeBuilder package, announced on June 4, offers homebuyers a grant of $25,000 to build a new home worth less than $750,000. The grant can also be spent on renovations valued between $150,000 and $750,000 to an existing home valued at no more than $1.5 million.

The scheme is limited to owner-occupiers (not investors) on incomes below $125,000 for singles and $200,000 for couples. The amount of money on offer is uncapped, but the government expects it to cost about $688 million for roughly 27,000 grants.

To be eligible, renovators must sign a contract with a builder by the end of 2020. They will need to have plans drawn up, finance approved, and any building and development approvals secured.

The package has been well-received by the housing industry, which hopes it will encourage buyers to bring forward purchases and support construction jobs. While critics argue the HomeBuilder package is too limited in scope and time to make a significant impact, it is more likely to support house prices than harm them.

House prices marking time

According to CoreLogic, national home prices edged up 0.6 per cent in the three months to the end of May, at the height of the economic shutdown. Melbourne was the only market to lose ground during that period (-0.8 per cent) but all regions lost momentum.

However, sales activity bounced back by an estimated 18.5 per cent in May after a drop of 33 per cent in April. The rise in sales coincided with an easing of social distancing restrictions, the arrival of JobKeeper payments in people’s pockets and growing consumer confidence.

On an annual basis, national home values rose 8.3 per cent in the year to May with Perth (-2.1 per cent) and Darwin (-2.6 per cent) the only capital cities where prices are still lower than a year ago.i

Rents and yields falling

Rents in every capital city except Perth fell in the two months to May. Falling rents are welcome news for renters, especially in cities like Hobart where a booming property market and the conversion of long-term rentals into short-term Airbnb lets had priced many out of the market.

However, falling rents are not so good for property investors. Rental yields were 3.8 per cent nationally in May, although higher in regional areas (4.9 per cent) than capital cities (3.5 per cent).

According to CoreLogic, there is a strong chance that rents will fall more than housing values, putting further pressure on rental yields. Yields in Sydney and Melbourne are already at or near record lows.i

Looking ahead

While the outlook for the property market is brighter than feared, there are still challenges ahead.

One test will come after September when JobKeeper payments and loan repayment holidays are removed. There is a risk that mortgage arrears and distressed sales could increase at that time. While unemployment is now expected to peak at around 8 per cent, not 10 per cent as previously forecast, it is not expected to return to pre-pandemic levels for at least two years.ii

On the positive side, interest rates remain at record lows. The OECD expects the Australian economy will bounce back by 4.1 per cent next year (if the coronavirus is kept under control), after a contraction of 5 per cent in 2020. This is a better economic performance than almost any other nation.iii

While the outlook for property is still uncertain, the stirrings of economic activity are encouraging. If you would like to discuss your property strategy in the light of current market developments, please get in touch with one of our financial planners on 03 5120 1400.

https://www.corelogic.com.au/sites/default/files/2020-06/CoreLogic%20home%20value%20index%20June%202020%20FINAL.pdf

ii https://www.businessinsider.com.au/australian-unemployment-forecast-government-treasury-covid19-2020-6

iii https://www.afr.com/policy/economy/australia-leads-on-economic-recovery-oecd-20200610-p5514b

Material contained in this publication is a summary only and is based on information believed to be reliable and received from sources within the market. It is not the intention of RGM Financial Planners Pty Ltd ABN 36 419 582 Australian Financial Services Licence Number 229471, RGM Accountants & Advisors Pty Ltd ABN 69 528 723 510 or RGM Finance Brokers Pty Ltd ABN 81 330 778 236 (RGM) that this publication be used as the primary source of readers’ information but as an adjunct to their own resources and training. No representation is given, warranty made or responsibility taken as to the accuracy, timeliness or completeness of any information or recommendation contained in this publication and RGM and its related bodies corporate will not be liable to the reader in contract or tort (including for negligence) or otherwise for any loss or damage arising as a result of the reader relying on any such information or recommendation (except in so far as any statutory liability cannot be excluded).

Liability limited by a scheme approved under Professional Standards Legislation.

COVID-19 Update – August 2020

Tax season is firmly upon us here at RGM, and due to the current lockdown restrictions we are doing things a little differently.

We are conducting most tax returns via telephone appointment with the help of Microsoft Teams for screen sharing. Clients are also able to sign their tax lodgement forms digitally through our secure MYOB portal via our website. If you haven’t already done so, please download our RGM app which allows you to view, upload and digitally sign specific documents directly into our secure area. Please see links below for how to download the RGM App.

These measures ensure that social distancing can be observed throughout the tax return process, which is excellent news for any of our clients in Stage 4 lockdown in the Cardinia, Casey or Greater Melbourne areas.

We are currently discouraging face-to-face appointments, depending on your situation. However, if you do have to come into one of our offices you must wear a face mask in accordance with the DHHS mandate.

This year, it is more important than ever to get the most out of your tax refund. If you have been working from home, we recommend that you keep a log of your hours worked in order to claim the 80% COVID hourly rate deduction.

If you would like to book an appointment, or have any queries, please don’t hesitate to contact us on 03 5120 1400.

Downloading the RGM app is easy!

  1. Go to the APP STORE or GOOGLE PLAY.
  2. Type ‘RGM’ into the search bar.
  3. Click on the RGM logo and download the app.
  4. Click on the ‘i’ button in the top right corner and select ‘Login’, then enter your email address and create a password. Press register.
  5. You’ll receive a 3 digit code via email. Simply enter the code into the RGM app to complete your registration.

Extension of the JobSeeker Program

The Government is extending the JobSeeker Coronavirus Supplement to eligible recipients to 31 December 2020. The amount of the supplement will be adjusted to reflect the gradually improved economic conditions and improving labour market.

Both existing and new recipients eligible for the Coronavirus Supplement will continue to receive $550 per fortnight up to and including 24 September 2020. From 25 September, the $550 per fortnight Coronavirus Supplement, which effectively doubled the fortnightly income support payment, will be reduced to $250 per fortnight. 

New eligibility testing

From 25 September 2020, new eligibility testing and access to payments for new and existing JobSeeker and other income support recipients will also be introduced. These include; 

  • Income free threshold increase: from 25 September 2020 until 31 December 2020, the income free threshold for the JobSeeker Payment recipients will increase from $106 per fortnight to $300 per fortnight. The threshold for other income support payment recipients will increase to $300 from $143 per fortnight. 

    This means recipients can earn up to $300 per fortnight and continue to receive the maximum payment rate for the JobSeeker Payment and other income supper payments. If recipients earn over that threshold, they will still see their JobSeeker allowance tapered down.
  • Means testing: the government will also re-introduce an asset test for eligibility for all payments and the Liquid Assets Waiting Period (LAWP) for all payments will be reinstated.
  • Partner income testing: the partner income test cut-out will increase to $3,086.11 per fortnight, or $80,238.89 per annum for individuals with no personal income from 25 September 2020. The partner income test taper rate will increase to 27 cents on 25 September 2020 until 31 December 2020.
  • Reinstated job-seeking requirement: from 9 June 2020, the mutual obligation requirements were reintroduced including; 
    • voluntary job searches;
    • at least one phone or online appointment with a JobSeeker’s employment services provider;
    • voluntary participation in activities, either online or in person; and
    • no payment suspensions or penalties for failure to comply.

Please don’t hesitate to give us a call and speak to an Adviser on 03 5120 1400 if you have any questions about how the changes to the JobSeeker Payment will impact your financial situation. 

Information in this article has been sourced from the Treasury website: https://treasury.gov.au/sites/default/files/2020-07/Fact_sheet-Income_Support_for_Individuals.pdf

Material contained in this publication is a summary only and is based on information believed to be reliable and received from sources within the market. It is not the intention of RGM Financial Planners Pty Ltd ABN 36 419 582 Australian Financial Services Licence Number 229471, RGM Accountants & Advisors Pty Ltd ABN 69 528 723 510 or RGM Finance Brokers Pty Ltd ABN 81 330 778 236 (RGM) that this publication be used as the primary source of readers’ information but as an adjunct to their own resources and training. No representation is given, warranty made or responsibility taken as to the accuracy, timeliness or completeness of any information or recommendation contained in this publication and RGM and its related bodies corporate will not be liable to the reader in contract or tort (including for negligence) or otherwise for any loss or damage arising as a result of the reader relying on any such information or recommendation (except in so far as any statutory liability cannot be excluded).

Liability limited by a scheme approved under Professional Standards Legislation.

JobKeeper Changes Announced

The JobKeeper Payment has been extended by a further six months to March 2021, targeting support to those organisations which continue to be significantly impacted by COVID-19. 

From 28 September 2020, eligibility for the JobKeeper Payment will be based on actual turnover in the relevant periods. The payment rate will be reduced and a lower payment rate will be introduced for those who work fewer hours. Other eligibility rules remain unchanged. 

Business eligibility

Organisations seeking to claim the JobKeeper Payment will be required to reassess their eligibility and demonstrate a significant decline for the JobKeeper Payment extension with reference to their actual GST turnover, relative to comparable periods, to receive payments after 27 September 2020. 

Organisations will need to demonstrate that they have met the relevant continuing decline in GST turnover for both the June and September quarters 2020 to be eligible for JobKeeper Payment from 28 September 2020 to 3 January 2021. 

In order to be eligible for the second JobKeeper Payment extension period of 4 January 2021 to 28 March 2021, organisations will again need to demonstrate their actual GST turnover has significantly fallen in the June, September and December 2020 quarters relative to comparable periods. 

JobKeeper payment rates

The JobKeeper Payment rate will be stepped down and paid at two rates, rather than the previous flat payment, to better reflect the pre-COVID-19 income of recipients. 

The rates are based on the amount of hours worked by eligible employees and for business participants who were actively engaged in the business in the four weeks before 1 March 2020. 

Eligible employees who worked 20 hours or more a week* Eligible employees who worked less than 20 hours per week*
From 28 September 2020 to 3 January 2021$1,200 per fortnight$750 per fortnight
From 4 January 2021 to 28 March 2021$1,000 per fortnight$650 per fortnight
* in the four weeks before 1 March 2020.

Businesses and not-for-profits will be required to nominate which payment rate they are claiming for each of their eligible employees or participant. 

The JobKeeper Payment will continue to be made by the ATO to employers in arrears and employers will be required to continue to make payments to employees equal to or greater than the JobKeeper payments. 

Contact a Financial Adviser today if you need help managing your business cashflow or applying for government financial assistance during the current crisis. 

Information in this article has been sourced from the Treasury website: https://treasury.gov.au/coronavirus/jobkeeper/extension

Material contained in this publication is a summary only and is based on information believed to be reliable and received from sources within the market. It is not the intention of RGM Financial Planners Pty Ltd ABN 36 419 582 Australian Financial Services Licence Number 229471, RGM Accountants & Advisors Pty Ltd ABN 69 528 723 510 or RGM Finance Brokers Pty Ltd ABN 81 330 778 236 (RGM) that this publication be used as the primary source of readers’ information but as an adjunct to their own resources and training. No representation is given, warranty made or responsibility taken as to the accuracy, timeliness or completeness of any information or recommendation contained in this publication and RGM and its related bodies corporate will not be liable to the reader in contract or tort (including for negligence) or otherwise for any loss or damage arising as a result of the reader relying on any such information or recommendation (except in so far as any statutory liability cannot be excluded).

Liability limited by a scheme approved under Professional Standards Legislation.

JobTrainer Package

The Australian Government will invest $2 billion into a JobTrainer Package, providing hundreds of thousands of Australians with the opportunity to retrain and upskill into sectors with job opportunities, as the economy recovers from COVID-19. 

The JobTrainer package has two aspects to it. 

The first aspect of the package, which is worth $1.5 billion, is aimed at keeping employed those already in apprenticeships and traineeships. Eligibility has been extended to medium-sized businesses with 199 employees or fewer who employed an apprentice as of 1 July 2020. 

This subsidy will be made available to expand and extend the Supporting Apprentices and Trainees wage subsidy until March 2021. This will cover an anticipated 50% of the wages of apprentices and trainees. 

The second aspect of JobTrainer is aimed at school leavers and those looking for work. The federal government has allocated $500 million to provide free or low cost vocational education and training courses in places of identified skills needs. That funding is conditional on matching funds from state and territory governments. 

The JobTrainer fund is anticipated to provide for around 340,700 additional training places to help school leavers and job seekers gain the skills they need to get a job. 

Further information about these changes will be made available in the coming weeks. 

Source: https://www.dese.gov.au/news/jobtrainer-skills-package-announced

Material contained in this publication is a summary only and is based on information believed to be reliable and received from sources within the market. It is not the intention of RGM Financial Planners Pty Ltd ABN 36 419 582 Australian Financial Services Licence Number 229471, RGM Accountants & Advisors Pty Ltd ABN 69 528 723 510 or RGM Finance Brokers Pty Ltd ABN 81 330 778 236 (RGM) that this publication be used as the primary source of readers’ information but as an adjunct to their own resources and training. No representation is given, warranty made or responsibility taken as to the accuracy, timeliness or completeness of any information or recommendation contained in this publication and RGM and its related bodies corporate will not be liable to the reader in contract or tort (including for negligence) or otherwise for any loss or damage arising as a result of the reader relying on any such information or recommendation (except in so far as any statutory liability cannot be excluded).

Liability limited by a scheme approved under Professional Standards Legislation.

Making peace with the unknown

Life constantly challenges us with unknowns, yet some of these hit closer to home and harder than others in their impact.

The coronavirus is unprecedented in our lifetimes, so we are charting new territory in the world’s response to this crisis. The uncertainty around its far-reaching impact is creating fear for many around the globe, as governments act to minimise the spread of the virus.

Due to the fast changing nature of the government response to this momentous challenge, there are significant unknowns. There are short term unknowns around the government’s evolving response to the crisis and you could be concerned about the stability of your work situation. And longer term about how will this impact you into the future? Perhaps you’re wondering when you will be able to retire as your super balance takes a dive? Will the economy and businesses survive the disruption? How will you be supported through this period?

You are not alone in experiencing these fears. As humans we like to deal with ‘knowns’ and plan accordingly, rather than be at the mercy of uncertainty and instability. Whether it’s something as big as the coronavirus or a smaller unknown, there are however ways we can become more comfortable with uncertainty.

Planning for the unknowns

Planning for the unknowns sounds like a contradiction. After all, if we don’t know how, when and if we will be impacted, how can we plan for it? Yet planning for potential outcomes can help us feel more in control and be one less worry to deal with.

You don’t need to think of every possible eventuality, but given the challenges society is facing, consider what the implications mean for you and your family. What can you do to minimise the impact?

Then the next, possibly more challenging thing to do, is to accept that you can’t plan for all eventualities and acknowledge that there may be some things out of your control. Focus your attention on what you are able to have some control over and then look at narrowing the list down to what really matters most to you, letting the rest of the ‘noise’ dissipate.

Stay positive and engender connection

The situation is changing rapidly and it’s tempting to constantly monitor news feeds, as it can feel more empowering to feel like you know what is going on. Just be mindful of taking breaks from the updates if they are fuelling feelings of uncertainty. Step outside and enjoy a little fresh air, call a friend or just do something small that gives you a bit of a breather and a little perspective.

The societal impact of the coronavirus is huge and is having a significant impact effect on many of our lives. It’s important to remember that these changes aren’t necessarily permanent and that we are all in this together.

Connection is important in helping us feel grounded and supported during a period of uncertainty. This crisis is first and foremost a health and human crisis, so we need to be respectful of not only our own health, but those of others. We can help those who are more vulnerable. There are many good news stories arising of people assisting and connecting with their neighbours and those in need.

Understanding the impact on the markets

Markets have experienced a significant downward trend as the impact of the coronavirus continues to develop across the globe. This has had a significant impact on investments and more broadly on superannuation account balances.

While it is understandable to feel unsettled, consider your long term financial goals. Avoid making rash decisions based on fear, as this can crystallise your losses and put you on the sidelines for when the market recovers and as history shows, it always does.

Especially during this period of uncertainty, I hope you are keeping well and looking after yourself. We are here for you every step of the way. Don’t hesitate to get in touch with your adviser if you need assistance.

Material contained in this publication is a summary only and is based on information believed to be reliable and received from sources within the market. It is not the intention of RGM Financial Planners Pty Ltd ABN 36 419 582 Australian Financial Services Licence Number 229471, RGM Accountants & Advisors Pty Ltd ABN 69 528 723 510 or RGM Finance Brokers Pty Ltd ABN 81 330 778 236 (RGM) that this publication be used as the primary source of readers information but as an adjunct to their own resources and training. No representation is given, warranty made or responsibility taken as to the accuracy, timeliness or completeness of any information or recommendation contained in this publication and RGM and its related bodies corporate will not be liable to the reader in contract or tort (including for negligence) or otherwise for any loss or damage arising as a result of the reader relying on any such information or recommendation (except in so far as any statutory liability cannot be excluded).

Liability limited by a scheme approved under Professional Standards Legislation.

The Economic Stimulus Package: Instant asset write-off threshold increase explained

A key part of the government’s economic response to the coronavirus is to support business investment and cashflow by increasing the instant asset write off threshold and eligibility rules.

So what is the instant asset write-off (IAW) and how can it help your business? 

Claiming an immediate deduction

Put simply, the IAW provisions allow your business to claim an immediate tax deduction for the full cost of a business asset you buy. Normal depreciation requires you to deduct the cost against your business profits over several tax years. 

Under the new rules, you can claim a tax deduction in the same financial year you purchase new or second-hand plant and equipment costing under $150,000. 

The IAW is not a cash refund. You don’t get the amount you spend back from the ATO, but instead get the advantage of bringing forward a tax deduction you would normally receive over several tax years. 

A simple example is a plumber who buys a new $16,000 trailer for his company. Using the IAW he can claim an immediate tax deduction of $16,000, which in turn reduces his business profit so he pays less tax. 

Rules for the IAW

To claim the IAW, the total cost of the asset must be under the relevant threshold. This includes the cost of having the asset installed and ready for use. 

Each asset must be under the threshold, but there’s no limit to the total amount your business can claim. 

If your business is registered for GST, the IAW threshold excludes GST. Otherwise, the threshold includes GST. 

From 12 March 2020, businesses with an aggregate turnover of up to $500 million are eligible for the IAW, up from $50 million previously. 

Eligible assets for the IAW

What you can purchase ranges from furniture through to computers and IT equipment, that may be required to enable staff to work remotely. 

Industry specific kit such as new tools for tradies, or POS devices and security systems for a retail store also meet the rules. 

Although the IAW is generous, assets such as horticultural plants and in house software are ineligible. 

Watch out for the traps

To claim the deduction, your new asset must be fully installed and ready for use before the end of the financial year in which you lodge your claim. 

If you are a sole trader, you also need to apportion any private use. For example, if you purchase a new car and use it for business purposes 70 per cent of the time, you can only claim 70 per cent of the cost. 

You are not permitted to reduce the asset’s price with a trade-in or personal use apportionment to get under the current $150,000 threshold. For example, if your new equipment costs $210,000 and business use is 70 per cent (leaving a claimable amount of $147,000), you can’t claim the IAW as the original cost is still over the threshold. 

If your business is structured as a partnership, it’s important to remember the partnership owns the asset – not the individual partners – so there’s no double-dipping. If a partner buys the asset in their own name and doesn’t qualify as a small business taxpayer personally, they can’t claim the write-off. 

Using simple depreciation

If your business buys an asset valued over the IAW threshold, you can’t claim the immediate deduction. You can, however, allocate it to your general small business pool and use the simplified depreciation rules

The general depreciation rules apply if you are ineligible or choose not to use the simplified rules, or if the ATO classes your business as medium-sized. 

Using a general small business pool allows you to combine the business portion of higher cost assets and claim a 15 per cent deduction in the financial year you start using them, then 30 per cent each year after that. 

Accelerated depreciation initiative

As part of the government’s coronavirus response, medium businesses with a turnover of less than $500 million can use accelerated depreciation rules to deduct 50 per cent of the cost of an eligible asset on installation. Normal depreciation rules apply to the balance of the asset’s cost. 

In these unprecedented times, we are here to assist you. Please don’t hesitate to give us a call on 03 5120 1400 if you have any questions about the instant asset write off or any aspect of the broader stimulus package.

Material contained in this publication is a summary only and is based on information believed to be reliable and received from sources within the market. It is not the intention of RGM Financial Planners Pty Ltd ABN 36 419 582 Australian Financial Services Licence Number 229471, RGM Accountants & Advisors Pty Ltd ABN 69 528 723 510 or RGM Finance Brokers Pty Ltd ABN 81 330 778 236 (RGM) that this publication be used as the primary source of readers’ information but as an adjunct to their own resources and training. No representation is given, warranty made or responsibility taken as to the accuracy, timeliness or completeness of any information or recommendation contained in this publication and RGM and its related bodies corporate will not be liable to the reader in contract or tort (including for negligence) or otherwise for any loss or damage arising as a result of the reader relying on any such information or recommendation (except in so far as any statutory liability cannot be excluded).

Liability limited by a scheme approved under Professional Standards Legislation.