Home > Claim small businesses could rort Tony Abbott’s new tax deductions

Claim small businesses could rort Tony Abbott’s new tax deductions

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The budget measure which gives small businesses a $20,000 upfront tax deduction on asset purchases could be rorted, according to a prominent tax adviser.

As the Australian reports, Institute of Public Accountants’ senior tax adviser Tony Greco warned that it would be possible to get around the $20,000 threshold by breaking down products and selling them as smaller components worth less than this amount.

Unscrupulous retailers could boost sales by doing this. Or, Greco added, potential customers might ask the supplier to break expensive products into parts and sneak under the $20,000 limit.

Prime Minister Tony Abbott dismissed the fears and said the tax office has experience in ensuring regulations are not rorted.

“I am very confident that this will be administered fairly, justly, effectively and to the benefit of all the people of Australia,” he said.

The idea of the measure, which was announced in Tuesday’s budget, is to help small businesses improve their cash flow.

All small businesses will get an immediate tax deduction for every asset they buy costing less than $20,000. Currently, the threshold sits at $1,000. This $20,000 limit applies to each individual item. Small businesses can now apply this $20,000 rule to as many individual items as they like.

Any assets over $20,000 can be added together (‘pooled’) and depreciated at the same rate. These assets are depreciated at 15 percent in the first income year, and 30 percent per year thereafter. If the value of the pool is below $20,000 until the end of June 2017 it can be immediately deducted too.

As the ABC reports, one small business owner Shaw Fanaian, who runs a Sydney security doors business, welcomed the change.

He said small businesses are conscious about spending money these days and “everything helps”. For example, he said, his business needs a new ute.

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