Business Tax Questions

There are few methods that can be used to calculate depreciation. We, as accountants, choose the one that gives us a better claim to reduce your tax liability. Many businesses improve their operations and revenue by upgrading their assets, such as motor vehicles including cars, trucks, furniture, computer & technology, plants and equipment, machinery, etc.

Please check out the below links, and please do not hesitate to contact Roger on 0452 669 147 if you have any questions about depreciation:

https://www.ato.gov.au/businesses-and-organisations/income-deductions-and-concessions/depreciation-and-capital-expenses-and-allowances

If you meet the eligibility requirements, you are entitled to claim a deduction for the superannuation contributions you've made to a complying superannuation fund or retirement savings account.

The maximum concessional superannuation contribution, which encompasses employer superannuation contributions, salary sacrificed super, and personal deductible contributions, stands at $27,500 per year. However, if your total superannuation balance is less than $500,000 after the preceding year and you haven't utilised your entire cap in prior years, you may be permitted to contribute more by utilising your unused cap amounts from the 2019 tax year onward. These unused cap amounts can be carried forward for up to 5 years.

It's essential to have initially notified your superannuation fund of your intention to make the claim and received confirmation before proceeding with the claim.

https://www.ato.gov.au/tax-rates-and-codes/key-superannuation-rates-and-thresholds/contributions-caps

If your annual turnover falls below $50 million, you become eligible to access various small business concessions, which include:

• Income tax concessions
• Excise concessions
• PAYG instalment concessions
• FBT concessions

For most concessions, the threshold of $50 million in turnover applies. However, there are exceptions:

• The small business income tax offset has a $5 million turnover threshold.
• The CGT concessions have a $2 million turnover threshold. If your business doesn't meet this threshold, you might still access the CGT concessions if the total net value of its CGT assets is less than $6 million.

Additionally, if your turnover is below $10 million, you might qualify for the GST concession, which can aid in managing cash flow.

Capital Gain Tax (CGT) rules apply differently to businesses as compared to family trusts and individuals. Yes, your business can get a CGT concession and be able to reduce tax. If your business is eligible to get or apply for a small business CGT concession, please check out the below link for more information:

https://www.ato.gov.au/businesses-and-organisations/income-deductions-and-concessions/income-and-deductions-for-business/concessions-offsets-and-rebates/small-business-cgt-concessions/small-business-cgt-concessions-eligibility-conditions/cgt-concessions-eligibility-overview

A common question car buyers ask themselves is whether they should pay in cash or get a car loan. Find out about the pros and cons of financing a car compared to paying cash upfront read more.

Unfortunately, there is no standard answer. It depends on many factors, such as the cost of the car, its operating costs and its usage.

Here are a few points to keep in mind when working out what will give you the biggest tax deductions when buying a motor vehicle:

Motor Vehicle Purchased in a Personal Name

When owned in personal names, the only two methods are:

• Logbook method
• Cents per kilometre method

If going with the latter, the deduction available is 85 cents kilometre travelled for business purposes. This is capped at 5,000 km, so a maximum deduction of $4250.00 per annum.

Motor Vehicle Purchased by a Company or Trust

When owned by a company (or trust), all costs are deductible by the company (or trust).

However, if the vehicle is used for private purposes, a contribution is required to be made to cover private usage in order to avoid fringe benefits tax.

Fringe benefits tax can also be avoided if purchase vehicles that are exempt. So, what is effectively deductible is the costs paid less this contribution for private usage.

Unless a log book has been prepared, the deemed private usage will be an amount equal to 20% of the cost price of the car (the cost price of the car is reduced by 1/3 after owning it for 4 years).

The company will be able to deduct costs such as depreciation, all operating costs (fuel, repairs, registration, insurances, etc.), interest if buying the vehicle on HP or on a lease and in addition to that, if registered for GST, claim the GST input tax credit on the vehicle cost and some of the ongoing operating costs.

Depreciation

Depreciation is a percentage of the cost of price of the motor vehicle but capped at a cost of $68108.00. The maximum GST input tax credit that can be claimed is one-eleventh of the capped cost price.

The deemed private portion is based on 20% of the full cost and is not capped at $68108. So, for expensive motor vehicles, you can actually have a deemed private portion that is greater than the total deductible costs and that is why it is usually not effective to have expensive cars owned by your company.

The base equation to determine if owning the car in your company name will give you better tax deductions than owning it personally is:

We can run models to determine this for you.

The ATO allows depreciation for a motor vehicle to be claimed based on an eight year useful life, either at 12.5% of the cost price each year or 25% using the diminishing value method.

There is another method called “General Pool,” which is widely being used to claim depreciation on cars. This method is used by most accountants including Roger Boghani tax & business services. This method allows you to claim 15% in first year and 30% in all subsequent years. Please note that depreciation is claimed on the net of the GST amount.

But, in reality, a motor vehicle loses most value in the first 12 months, and there are strategies that could be implemented to produce the best results.

Contact your Roger Boghani advisor on 0452 669 147 if you would like to run some calculations for you or if you have any further questions regarding this topic.