Australia has always been a nation of small businesses and independent retailers, and there are many governmental and financial initiatives intent on supporting entrepreneurial business owners. Amongst these are tax policies that are designed to ease immediate financial burden, which retailers have access to during the end of financial year period. Specifically, these are the instant asset write-off scheme and the temporary full expensing scheme.
While all retailers have access to EOFY schemes, many don’t take advantage of them due to the rush already experienced around the EOFY period or from the language and technical details that make it easier not to make a claim.
If you’re interested in claims that can support your store this tax time, or in understanding the difference between an instant asset write-off and a temporary full expense claim, keep reading, as we’ll cover off the basic information you should know.
Before you can claim an asset, you need to know what constitutes a claimable asset.
Only depreciating assets can be claimed, so you can claim an EFTPOS terminal, or shelving, but you wouldn’t be able to claim POS software or a Microsoft office license. Typically, if it’s tangible and used for business purposes, it’s claimable. A notable exception here are items used for purely cosmetic purposes – if you’ve decorated your check-out area with some pot-plants, you can’t claim them.
Other stipulations are that you must have purchased it outright, and you can’t be leasing it out for more than 50% of the time. If you haven’t yet purchased an asset, it’s wise to investigate whether it’s eligible prior to purchase.
The instant asset write-off scheme
The federal government’s instant asset write-off scheme is the usual way eligible retailers will claim a tax deduction on assets purchased and used for the business. For example, if you need to buy a new screen to display and interact with your POS system you could claim it as an instant asset write-off.
You can make a claim for multiple assets under the scheme, as long as the cost of each item is under the $150,000 threshold.
Importantly, any item you claim must have been purchased and used in the same year that the write-off is claimed. Meaning you can’t claim something you intend to purchase next year, nor can you claim a bit-ticket item initially purchased a few years back even if you’ve only started using it this year.
However, due to the massive revenue disruption caused by the pandemic, the government has temporarily replaced the instant asset write-off scheme with the temporary full expensing (TFE) scheme. Any asset purchased or installed after 7:30pm on 6 October 2020 should be claimed through the TFE scheme.
The temporary full expensing (TFE) scheme
As a response to the increased hardship imposed on small businesses from the COVID-19 restrictions, the government has instituted the temporary full expensing scheme. TFE is acting as an upgraded form of financial support from the instant asset write-off scheme.
The most noteworthy difference between the two, is that the TFE scheme doesn’t have the $150,000 threshold for claims. As long as the asset is a genuine business expense and used within the year of the claim, the cost of the asset is irrelevant.
Currently, assets purchased between after 7:30pm 6 October 2020 and before 30 June 2023 are eligible to be claimed under TFE. Assets purchased outside of these dates, will fall under the instant asset write-off scheme.
It’s worth taking the time to understand tax policies around what you can and cannot claim for all retailers, but particularly those looking to grow their business over the coming financial year.
By utilising the instant asset write-off or TFE schemes, you can make an immediate investment in your business that will provide an instant boost to your retail operations for the coming year.
Lightspeed is not a financial or tax advisor. Lightspeed recommends seeking professional help from an accountant or contacting the Australian Taxation Office (ATO).
Gordana Redzovski is vice president of retail for Asia Pacific at Lightspeed.