Get Out There and Have A Go For The Country?
Over the next month or so, many businesses will be thinking about purchasing assets to take advantage of the $20,000 Small Business Tax Deduction, announced in the recent Federal Budget.
Is this a good decision?
Yes ……….and no.
It is true that these purchases will qualify for an immediate tax deduction, which will reduce the business tax liability. On the surface this is a good outcome however there are a number of things to consider.
Many retailers are advertising products specifically targeted to the tax saving. There are other companies that are advertising finance to help with the purchase. As an example. Kogan even put a bundle together, which contained a significant number of TV’s, a few laptops and various other items. Interestingly the bundle appears to be sold-out, so it was obviously a successful promotion – check it out if you want:
The wording of the budget measure specifies that the purchase must be for an asset. My Macquarie Dictionary defines an asset as “A useful thing or quality”.
Proteger Consulting’s view is that business decisions should be made based on sound business logic. Asset purchases should be made because they add value to the business through increased productivity/ efficiency or improving profits.
Tax savings alone are rarely a sound reason for a purchase. Think about the various investment schemes that were in vogue some years ago. Yes the tax savings were significant (where the tax office did not challenge them) however in many cases there was significant loss of capital – far outweighing any tax saving.
By all means, if you are considering purchasing an asset that adds value, we agree with Joe Hockey, you should ‘get out there and have a go’. You’ll be helping your own business and helping another business. This is a good business decision and good for the economy. If you qualify for the tax saving, this should be considered a bonus and the purchase will be all the more sweeter.