In the 2018-2019 federal budget the government announced an increase to the Instant asset write-off from $25,000 to $30,000. This means that a car, furniture, equipment or other items used in Family Day Care up to the value of $30,000 purchased and installed after 7:30pm 2 April 2019 to 30 June 2020 may be claimed as a deduction in full in the year of purchase.
The $20,000 instant asset write-off is something that is likely well known to most educators and has been around for a number of years. A slightly less known fact is that on 29 January 2019 the government increased this amount from $20,000 to $25,000. Last night it was announced that this would increase further to $30,000.
The following summarises the applicable dates and amounts in claiming the full cost of assets in the 2018-2019 financial year.
1 July 2018 to 28 January 2019 - Assets less than $20,000
29 January to before 7:30 pm on 2 April 2019 - Assets less than $25,000
From 7:30 pm on 2 April 2019 to 30 June 2019 - Assets less than $30,000
Any asset you purchased under the amounts noted may be claimed as a full deduction based upon the date it was purchased and installed / ready for use as outlined.
This measure continues to provide a significant tax planning opportunity for any educator needing to reduce their income for tax purposes and considering purchasing a new car or other significant item of equipment for their family day care business.
Important: Considerations before making your purchase
Before you go out and spend big on that new car or other item, there are some very important things to consider:
This concession only applies to cars, furniture, computers or other items of equipment. It DOES NOT APPLY to building improvements such as extensions or renovations to either your home or outdoor areas.
You will only be able to claim the portion of the asset purchased so far as it relates to your family day care business. For example, if you are buying a car and you expect to use it only 50% of the time for Family Day Care, you will only be able to claim 50% of the cost as a deduction.
Ask yourself whether the asset you wish to purchase is an absolute business necessity. Educators can sometimes mistakenly go and spend money on items for the sole purpose of obtaining a tax deduction. Believe it or not, if you do not really need the item, you may better of keeping your money and paying tax on the profit rather than buying something you don't really need.
Consider whether you should purchase the asset before the end of the current financial year, or in the new financial year. For example, if your taxable income is expected to be low this financial year (2019) and you expect your income to be higher next financial year, it may be wise to hold off your purchase until after 1 July 2019 in order to get the maximum amount tax savings. Speak to your Accountant about some tax planning (or do the calculations yourself) to estimate your income and determine the best course of action for your individual circumstances.
Finally, $30,000 is likely to be a very significant investment for any educator. If due to the timing of this announcement you are unable to speak to your Accountant, FDC Tax are offering a free question and answer service in relation to this concession. You can contact us on 1300 FDC TAX (1300 332 829) or email us at email@example.com.