New $150K asset write off limit

Thanks @Paul@PFI our accountant isn't aware that we recently laid one staff member off, so our 6 first 6 month PAGYW this year will be lower than lasts, 50% of last years PAYGW would have maxed us to the $25k

Thanks for the info.

 

Redundacies can impact the PAYGW since much of a redundancy payment can be tax free up the ATO thresholds based on length of service. Anything above this incl general pay, accrued leave and pay for notice will be taxed and be eligible.

 

@Paul@PFI We're classed as a small business, and under our Award are exempt from Redundancy pay. The one guy we let go was casual, the remaining 3 are staff. We've enough work on the books to keep everyone going for maybe 2-3 months as long as our clients keep paying our invoices. If their cashflow drys up then we're toast regardless of how much work we have on the order book.

 

Yep. Banks are now offering loan repayment suspension if that helps.

Banks will defer loan repayments for six months for all small businesses affected by the coronavirus outbreak, Australian Banking Association chief executive Anna Bligh said. This is a result of the RBA injecting $105b into the financial system for this specific purpose.

As the economy takes an immediate hit from the measures to slow the spread of the virus, Ms Bligh said on Friday the number of calls to banks from distressed small business customers had increased "rapidly and exponentially."​

Keep an eye on this site as further measures are announced. If you buy stock speak to you lender about some options here.

What support is available to you? | business.gov.au

It may seem harsh but also consider all the strategies to extend that term so your position is improved. eg look at cashflows you can stop (like loans), accelerate the BAS as this can be lodged on 31 March even ? ATO will do a deferral if anything is due etc. You may find if employees accept it they may see 50% salary with the balance deferred a better than nothing option, also consider making everyone PT. I have seen businesses do that and the staff can really appreciate this v closing. Speak to everyone and be honest and open. Paying 20% now and then a bit more etc is better looking than stopping paying. Utilities may also be easily deferred. Maybe even a rent deferral ?

Tip - Dont drop prices but maybe consider a sale that helps cashflow as long as you can meet the supply later. But what else can you do to stimulate clients to buy ?

Tough times. Chin up. There is a loads of help out there if you ask. PS : Free tax advice too ! I have spoken to several in need this week and see this as a time to be supportive. No charge.

 

Great tips @Paul@PFI we're very open with our staff, they know the score. They know we'll keep them, and pay them as long as we can.

We're lucky we have zero business debts. We're run pretty lean and our overheads are low.

At this time of year I usually start looking at how to spend or disburse our war chest so we make "no" profit at the end of the year, this usually ends up with the two Directors taking the remaining profit via our trusts then the first round of incoming invoicing in July pays back the war chase buffer.

We just exercised the next two years option on our office lease last month, I'm thinking of pre-paying the next 12 months of lease form our contingency fund so at least we can keep the office going and myself and the other Director can keep working (even if unpaid) to keep the company alive if it came to it.

We're a drawing office, our "sales" as such mean winning work to create 3D models and produce single cutting sheet fabrication drawings for major structural steel buildings, so we have little to no consumables or material outlays and we own all of our equipment and software licenses outright so it's just a juggling act of winning enough work to keep the guys in employment and keeping the cash flow moving, then making sure we get paid for that work (which is usually 90 days after completion).

We might end up a bit lean, but we should be able to stay afloat even if things get very bad. I rally feel for others in say cafe etc, those sorts of industries.

 

I'm confused, if my business is predicted to make a -30K loss this financial year, does that mean buying a new 50K work ute written off 100% would take my loss down to -80K? So carrying that loss into next FY would make sense if I'm due to make 100K profit, but what if I am expanding more and due to make another loss?

 

Spot on. The loss would carry forward anyway. Its import to remember to asset write off just brings all the depreciation forward and it isnt a cash handout at all. If there is no profit it wont save a cent. And if there is a profit a 27.5% (Co Small Business) is a small benefit v's paying out all the money for an asset. (eg $27,500 tax saving per $100K spent) I recommend the write off for profitable businesses and for essential and necessary plant items.

Also consider how the aset is funded. For example you buy the ute in June and its a chattel mortgage. So the initial payment is say $650 a month and the only payment is made in June. The initial issues are :
- Deposit $2K outflow
- New loan $55K (no real cash inflow or outflow - But a stream of monthly $650 outflows that include interest and loan reduction)
- GST claimed $5K (inflow)
- $50K write off (no cash inflow or outflow)
- 1 month of interest deductible
- Initial rego and CTP deductible
Where a business that pays cash for a ute would face a $50K cash outflow which may be undesireable in these economic times as it could pay a worker for half a year to help make profit

Net cashflow has been enhanced. I always recommend that the income producing worth of the plant be considered. Buying a second excavator when you have a suitable one already just adds to cash outflows. But if a second excavator could increase chargeable output or reduce job times it may enhance profit.

 

Thanks for clearing that up. So to sum it up, there is ZERO benefits of the Gov 150K write off for my case this EFY because of the loss, but carrying it forward will also be no use as next year's expansion will most likely be another negative P&L. Shame.

I've also just finished renovating my 1st PPOR over the past 2years which cost me just over 100K. Then the Gov releases the 25K grants for renos etc, once again looks like I won't be able to claim anything on that front either! All this stimulus talk gets everyone excited, but after reading reports less then 50% of ALL Australian small businesses are going to be able to claim any write offs this FY. I wonder what the percentage is for first home buyers.

We need stimulus to help property investors also! Common Scomo

 

I believe one of the best stimulus measuers the Govt could introduce is a tax deduction for Australian holidays to Australian resident taxpayers. Not the airfares or meals just the accomodation and perhaps tours etc let the wealthy spend up and help the tourism industry and regional areas. Its not like they can go elsewhere at present.

The home builders grants etc are token. Really just to support construction and then it reflects 2/5th of FA of a benefit to someone spending up to $750K

Property investors should consider what they have a present day benefit. I can see a day coming soon when we all have to pay more taxes and.....

 

What if it is signwritten as an advertising platform for your business ?

 

This is on old one you hear at bbqs. You couldn't claim any costs in relation to this unless the car was already deductible. .i.e. signs on cars don't allow any more deductions - except for the paint perhaps.

 

The advertising would be capital and part of the car...Depreciable and subject to car use...is logbook

 

According to ATO website it looks like that the small businesses can also write off the small value asset pool down to nil, if the pool's value is below $150k before F20 depreciation is applied. Hence you do not need to go and buy new assets to benefit this new stimulus measure.

 

@Tillie agree that is something i've been discussing in tax planning with my clients. fantastic tax planning opportunity.

 

When will there be an instant tax write off for non tradies or non buisinesses. Maybe an instant new suit/uniform write off...

 

Won't be.