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amnesia
15th July 2009, 03:22 PM
HI all

Last question before I buy

I have now heard there is a small business 50% tax break.

I run a small business so is this correct

Buy MBPro $3999 - 50% = total cost to me after tax return = $1995???

wmyeoh
15th July 2009, 03:30 PM
Not quite.

It's a 50% tax reduction. That is, you reduce the amount of tax your business pays by $3999.

Let's say you business is paying tax at 30%. Therefore, you will recoup 30% of $3999.

Phillo
15th July 2009, 08:48 PM
The way it works is a bonus 50% deduction. As for the way it works... you need to have a look at how depreciation works as well.

You can read more on depreciation here: Guide to Depreciation (http://www.ato.gov.au/content/downloads/IND00191816n19960609.pdf)

So... lets assume you buy a laptop at $3000 (forgetting any GST impact) and you decide to depreciate the asset using the "prime cost method" (which means the value drops evenly every year).

We will also assume that you purchased the asset on 1st of July, so you get a full years worth of use out of the laptop.

*note: the effective life of a laptop for tax purposes is 3 years.


YEAR 1: Prime Cost depreciation: $1000 PLUS small business bonus deduction: $1500 = $2500 deduction off your income in YEAR ONE
Year 2: Prime Cost Depreciation: $1000 = $1000 Deduction off your income
Year 3: Prime Cost Depreciation: $1000 = $1000 Deduction off your income


Therefore over the effective life of the asset costing $3000.00 you get a deduction of $4500.00

What real tangible benefit it has on your hip pocket depends on a number of things. How your business is structured, how much you earnt in the year etc....

If you can take advantage of this bonus deduction. I would do it NOW... because you will see the real benefit of it by holding the asset for most of the year.

You can also use the diminishing value method of depreciation which will give you a higher deduction in year one, but this will reduce in subsequent years.

WHAT I DO SUGGEST: Consult your tax agent. They are qualified to give you advice on these matters.

Anthonyw
15th July 2009, 09:16 PM
WHAT I DO SUGGEST: Consult your tax agent. They are qualified to give you advice on these matters.

Top advice - as an accountant that has had too many calls with people getting told wrong information from car dealers, shops and other retailers you cant go wrong doing this!