Managing your practice during the coronavirus pandemic

As we emerge from the COVID-19 restrictions, practice owners have to look to their futures.

No one knows for sure what the next couple of months will bring but concessions announced by the Federal Government can help you get back on your feet as the pandemic passes.

BOQ Specialist’s Gavin Brandenburger explains: “Working with dental, medical and veterinary professionals for over 30 years, we know that getting finances in order is one of many tasks on the ‘to do before 30 June’ list. With COVID-19 now presenting additional challenges to practice owners, we’ve pulled out some of the key points to consider to help manage this process and ensure you get the most out of the current tax deductions available to you.”

Two key measures are applicable to practices. These are the increased instant asset write-off and the business investment incentive. Each one is designed to take some short-term pressure off your cash flow and will hopefully help you to withstand, then recover from, the economic impact of the coronavirus pandemic.

The $150,000 instant asset write-off

In the past, the instant asset write-off was available for assets up to $30,000 in value. It was only available to businesses with an aggregated turnover of less than $50 million. From 12 March 2020 that offer was extended, with a further extension announced in June 2020. With these extensions, the threshold has been increased to $150,000 and is available to businesses with an aggregated turnover of less than $500 million.

This tax concession means you can claim an immediate deduction for eligible assets in the year that they are first installed and ready for business use (FY20 or FY21). They must be physical assets which cost less than $150,000 and be installed ready for use between 12 March 2020 and 31 December 2020. This $150,000 threshold applies to both new and second-hand assets and on a per item basis (without any limitations on the number of items). 

Subject to any more action by the Government, it’s expected the instant asset write-off threshold will drop from $150,000 to $1000 (and will revert to small businesses with a turnover of up to $10 million) from 1 January 2021.

“This tax advantage is a simple and effective way to boost the health of your business,” says Brandenburger. “So it is important to investigate whether your assets are eligible for the deduction this financial year, or next financial year.” In addition, equipment suppliers may become more flexible over the coming months. “The tax break combined with the lower cost options can help to minimise the impact on cash outflows,” says Brandenburger.

 

Backing business investment incentive

Some capital equipment costs more than $150,000. So the Government has also introduced an investment incentive for those assets. Businesses with an aggregated turnover of less than $500 million will be able to deduct 50 per cent of the cost of an eligible asset on installation. The existing depreciation rules will apply to the balance of the asset’s cost over its effective life. This is not available in addition to the instant asset write-off. It’s applicable for assets that cost more than the thresholds mentioned above at the time when the asset is installed. This incentive also has a longer application period and is available for assets that are purchased, first installed and ready to use from 12 March 2020 until 30 June 2021.  
 

What assets are eligible?

Practitioners should seek advice from their tax adviser about what is eligible for the concessions. However, as a guide, equipment, such as new computers, medical equipment or any item that relates to a practitioner’s business is included. Items to be claimed must be physical assets. Marketing costs, for example, are not permitted. There are a few depreciating assets that are not deductible under this tax initiative, including software developed in-house by a business. Businesses have to buy and own the asset in order to get the immediate depreciation treatment. Financing the purchase via an asset purchase or chattel mortgage, credit card or overdraft/line of credit is also an acceptable option.


Be sure to act quickly

The expanded instant asset write-off concession will end on 31 December 2020. It would be worthwhile, therefore, to consider what assets you may wish to acquire and claim before the end of this financial year, as well as next financial year. Many practices will fit the criteria to benefit from the tax break—all you need to qualify is an Australian Business Number and a turnover of less than $500 million.

“In response to current challenges facing Australian businesses, these tax concessions may be a simple way to boost the health of your practice and set yourself up for the future. It is important for practice owners to ascertain if this is right for their particular circumstances and then move quickly to take advantage before the deadline,” concludes Brandenburger. 
 

If you’re looking to take advantage of these tax concessions, we can assist you with financing your asset purchase. Contact one of our financial specialists on 1300 160 160 to discuss the options available to you.

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      The information contained in this webpage is general in nature and has been provided in good faith, without taking into account your personal circumstances. While all reasonable care has been taken to ensure that the information is accurate and opinions fair and reasonable, no warranties in this regard are provided.