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Prepare to return to a new normal

As we emerge from lockdown, taking advantage of new tax concessions from the Federal Government’s stimulus package could help you manage the economic and health impact of COVID-19 for your practice and your patients.

There are two reasons why now could be a good time to be looking at purchasing new equipment for your practice. The first is the expected backlog of health problems resulting from the pandemic. While those problems aren’t necessarily directly related to COVID-19, many people experienced difficulty in accessing regular healthcare during lockdown and as a result remain untreated. The second reason is that the Federal Government has extended the increased instant asset write-off scheme and introduced an ‘immediate expensing’ scheme which will stay in place until 30 June 2022.

Overseas experience has shown us that as societies emerge from lockdown, they come out with a host of preventable problems. Unfortunately, elective procedures and non-urgent cases had to be put on hold until medical professionals were sure they could do them safely. For example, dentists are seeing a rise in bruxism and cracked teeth; vets are managing a wave of lockdown pets; and GPs and specialists are seeing the impact of chronic conditions as patients avoided hospitals out of fear of COVID-19.

As the Government’s efforts to flatten the curve appear to be working and as we slowly come out of isolation, we’ll see more of these problems appear - so upgrading or updating your equipment now to manage the coming wave may be prudent.

“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,” says BOQ Specialist’s Gavin Brandenburger. “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.” 

The $150,000 instant asset write-off

In the past, the instant asset write-off scheme 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. Originally running until 30 June 2020, that offer has now been extended to run until 30 June 2021. The threshold has been increased for assets up to $150,000 in value and is available to businesses with an aggregated turnover of less than $500 million, and can now be claimed on second-hand assets.

This tax concession means you can claim an immediate deduction on eligible assets that are purchased and installed or used between 12 March 2020 and 30 June 2021. The $150,000 threshold applies 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 $1,000 (and will revert to small businesses with a turnover of up to $10 million) from 1 July 2021. The new temporary tax incentive below, which allows a similar immediate write-off of assets, will continue to be available until 30 June 2022.

Temporary tax incentive

The Government has also introduced a temporary tax incentive that will allow all businesses with an annual turnover of up to $5 billion to claim an immediate deduction of the full value of all new, eligible, depreciable assets of any value that are first used or installed before June 30, 2022.

Businesses will also be able to claim full deductions for the cost of improvements made to existing depreciable assets. At the same time, SMEs with up to $50 million in annual revenue will be able to apply “full expensing” to all second-hand assets.

The scheme came into effect at 7.30pm on budget night, 6 October 2020. The scheme is an expanded accelerated depreciation program that allows businesses to claim a tax deduction for the full value of a purchase after its use, rather than claim depreciation amounts over several years. 

What assets are eligible?

Practitioners should seek advice from their tax adviser about what is eligible for these concessions. 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 may be an acceptable option.

While the changes in the budget have taken a bit of pressure off from the original December 31 deadline, it is still considered a temporary scheme. It would therefore be worthwhile to consider what assets you may wish to acquire and claim before the end of this financial year under the instant asset write-off scheme, as well as during the next financial year.

 

If you’re looking to take advantage of these tax concessions, contact us or talk to one of our finance specialists on 1300 131 141 to discuss the options available to you.

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  • Important Information

      The issuer and credit provider of these products and services is BOQ Specialist – a division of Bank of Queensland Limited ABN 32 009 656 740 AFSL and Australian credit licence no. 244616 (“BOQ Specialist”). Terms, conditions, fees, charges, eligibility and lending criteria apply. Any information is of a general nature only. We have not taken into account your objectives, financial situation, or needs when preparing it. Before acting on this information, you should consider if it is appropriate for your situation. BOQ Specialist is not offering financial, tax or legal advice. You should obtain independent financial, tax and legal advice as appropriate

      For more information on the instant asset write off scheme you should visit the Federal Government’s and Australian Tax Office’s websites.