Buy All Tax Deductable Items in June 2017 and Claim Them in 2016-2017 Tax Return?

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Australian Taxation Office

• 

  djkelly69 on 04/03/2017 - 21:33

  +2

  Have fun

  I am not a tax expert by any stretch, but believe if the tool is used mainly for work purposes and costs less than $300, you can claim the deduction immediately (ie. the full cost of the tool).

  If it is over that amount, you would need to depreciate it over its effective life - ATO has a suggested effective life for almost everything, but you do not necessarily have to accept it. Obviously this is where it gets a bit more complicated (see above link).

  • 

    Blue Cat on 04/03/2017 - 21:35

    I am still not that deep. For the sake of simplicity lets say none of my tax-deductable items will be over $300, so I am expecting to claim back everything I get.

    • 

      djkelly69 on 04/03/2017 - 21:46

      +1

      In that case, assuming you are only using the tools for work purposes, you could claim for full cost of each tool as a deduction on your 16/17 tax return (assuming you earned enough income to cover the deductions).

      Not sure if it would raise red flags, but it is completely legal so you would have nothing to worry about even if it did. Lots of people try to incur deductible expenses in June in order to be able to claim them immediately - you even hear Officeworks, etc, advertising on the radio reminding people to do this.

      I think it is generally recommended to keep tax information/receipts for 5 years? Presumably there is some sort of warranty on most of the tools, so you would want to keep the receipts for that as well.

      Also if you are a sole trader, I would strongly recommend having an accountant on board who looks after most of this stuff for you.

      • 

        tomclancy on 04/03/2017 - 22:47

        +1

        djkelly69 is correct. To further clarify though, the $300 asset test is for medium-large businesses. Small businesses get the limit raised to $1,000 normally, however the ATO has provided a special one-off limit increase to $20,000 for small businesses assets purchased before 30 June 2017.

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  foxmulder on 04/03/2017 - 21:36

  -4

  Hi I'm not sure the exact answer for this but here are my thoughts:
  1. Buy all you want in June but expense it on July for next financial year.
  2. If it's your first year I'm sure either way as ATO is expecting business to lose money anyway.
  3. Just in case For more than $20k purchase you need to do depreciation over the expected years of the tool to be used.

  • 

    tomclancy on 04/03/2017 - 22:54

    +2

    1. Buy all you want in June but expense it on July for next financial year.

    No can do. Deduction is based on date of tax invoice. Buy in June = claim deduction in June.

• 

  Smulder on 04/03/2017 - 21:46

  -1

  No-where on your tax return do you need to state when you purchased the tools, just the $ amount. The only way they would find out is if you were audited and they wanted to see your receipts, which is fairly unlikely.

  If you are registered for GST however, then your BAS will narrow down the purchase period to the June quarter. Then again, having only recently commenced your business, it is not unreasonable that you would have more expenses at start up.

  Regardless, if they are all legitimate business receipts then you really have nothing to hide. Even if the ATO does ask you to provide evidence for your claim, if you have the receipts it will only be a slight inconvenience to provide it to them.

  • 

    [Deactivated] on 05/03/2017 - 00:14

    Maybe with depreciated items the date might matter?

    • 

      Smulder on 05/03/2017 - 08:10

      +1

      No, the depreciation schedule is not sent to the ato.

• 

  bluesky on 05/03/2017 - 02:02

  +1

  Tomclancy is correct about the instant asset write-off threshold of $20,000. This and this provide more details about this. It is worth noting that:

  The government has not extended the timeframe for the scheme, which is still due to end of June 30, 2017.

  So quite a good idea to have any expensive tools purchased by end of this financial year. As long as they are for your business, it should not matter they are all bought in June.

  Hope this helps.

• 

  The Danger Zone on 05/03/2017 - 10:43

  +3

  Purchasing in June to keep it in the current financial year is good financial sense and not dodgy provided all your receipts/deductions are valid. As a sole trader you should be wary about some advice that relates to company structures.

  Further to your situation as just starting out is whether your income will drastically increase between the FY16/17 to FY17/18? At the moment the tax-free threshold is $18,200 for both sole traders and individuals so unless you've earned over that this financial year not worth pushing deductions. ( https://www.ato.gov.au/rates/individual-income-tax-rates/ ).

  Dependant on your situation, it may make more sense to defer the purchases until next financial year if it means you will get greater value from the deductions themselves. For example if you will be increasing a bracket it may mean the deductions will be reimbursed at 32c compared to 19c to the dollar. Good luck with it.

• 

  Baysew on 05/03/2017 - 10:53

  +1

  My plan is to hold out until June and buy everything in June so I could have a clean 2017-2018 financial year start

  You 2017-2018 won't be "clean" as you are sure to have other purchases in that financial year.

  If you mean keeping your 2016- 2017 year clean of business expenses, you would need to buy in July not June.

  Also The $20k write off is per item, not in total. (And the previous amount was $1000 for self employed, not $300)