Are you eligible for the $20,000 small business tax deduction?

EVERYONE is talking about the $20,000 tax deduction for small businesses announced in last night’s budget. But what exactly is it and are you eligible?

CANBERRA, AUSTRALIA - MAY 12: Treasurer Joe Hockey speaks during a press conference within the Budget lock-up in Parliament House on May 12, 2015 in Canberra, Australia. The Coalition governments 2015 federal budget promises to stimulate growth and spending with $5 Billion tax relief for small businesses and a $3.5 Billion reform package for child care. (Photo by Stefan Postles/Getty Images)

EVERYONE is talking about the $20,000 tax deduction for small businesses announced in last night’s budget. But what exactly is it and are you eligible?

WHO CAN GET IT?

Any small business or sole trader with an Australian Business Number is eligible for the tax deduction as long as their business has an annual turnover of less than $2 million. This includes freelance journalists and any person with an ABN. Applying for an ABN is free and you can get the details here.

HOW DOES IT WORK?

Businesses or sole traders purchase the items outright and then get the money for the item back as a tax write-off.

WHAT CAN I PURCHASE?

Any item that relates to your business. This could include a plasma television, a new car, a fridge, a coffee machine, power tools or even a thermomix for a food writer. Items don’t have to be brand new and can also be second hand.

WHAT CAN’T I CLAIM?

Items to be claimed must be physical items. Marketing costs are not permitted. You also aren’t able to claim stock or software for your business.

CAN I ONLY CLAIM $20,000?

No, you can claim as many products under $20,000 as you desire. There is no limit.

ARE THERE ANY RULES AROUND MY CLAIM?

Yes, the items that you purchase must be related to your business.

IF I WANT TO BUY SOMETHING OVER $20,000 CAN I STILL CLAIM ANY DEDUCTIONS?

Yes. Any items over $20,000 can be added together (pooled) and depreciated at the same rate. These assets are depreciated at 15 per cent in the first income year and 30 per cent per year thereafter.

HOW LONG DO I HAVE TO CLAIM?

The $20,000 tax deduction began at 7.30pm last night and goes through to June 30, 2017. It is scheduled to go back to the original $1000 threshold after that time.

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Originally published as Are you eligible for the $20,000 small business tax deduction?