While welcoming the initiative, H&R Block has cautioned small businesses and their advisers to be careful when taking advantage of the new opportunity since the firm believes the ATO will be watching closely.
“The generous nature of this tax break means that some will be tempted to bend or break the rules in order to claim the deduction. The Australian Taxation Office will be watching closely and will no doubt devote compliance resources to checking these claims,” a statement from the firm said.
It also warned small businesses not to let the generosity of the tax break override their commercial interests.
“This tax break is ideal for those businesses which were planning to purchase assets anyway or have a real business need to invest,” said H&R Block.
“Remember, there’s no such thing as free money. You have to spend a dollar to get 30c back (or 28.5c after 1 July) so make sure those capital purchases fit with your overall business plan.”
Finally, it is also important, H&R Block said, that businesses realise the asset must be valued at $20,000 or less to qualify for the instant deduction, otherwise the asset will be depreciated over a number of years as per the current tax rules.
“And don’t forget those extra costs which you might incur to get an asset into a state where it can be used in the business,” the accounting firm said.
“If you spend $19,500 on an asset but have to spend another $1,000 on installing the asset to make it useable, you won’t qualify.”