In May 2015, the Australian federal government introduced a temporary increase to a small business tax rebate, the instant asset write-off. The tax break now allows small businesses earning less than $2million per year to claim back purchases under $20,000 – a substantial increase on the previous limit of just $1,000.

The additional incentive was introduced to help small businesses to grow. And it means that you could afford to increase your budget for the year to take advantage of the benefit.

What is the small business tax rebate limit?

Small businesses, or sole traders, purchase the items outright and then get a portion of the money for the item back as a tax write-off.

This small business tax rule can be applied to any number of items – there is no limit.

What can you claim?

Small businesses can claim any depreciable assets that relate to the business as a tax deduction. This includes, for example, computers, a fridge, and even equipment such as pallet racking, storage accessories, power tools and fork trucks.

These items can be new or second hand, as long as it is a physical item and not money paid for intangible things such as a service or software.

How can you take advantage of the new $20,000 instant asset write-off?

If you’re a small business, or sole trader with an ABN, that has an annual turnover of less than $2 million, you’re eligible for this new tax break. You would cover the cost of the items up front; then claim the expenses to receive the benefit.

This incentive is only available until 30 June 2017, when it will return to the $1,000 limit.

For more information please visit https://www.ato.gov.au/General/New-legislation/In-detail/Direct-taxes/Income-tax-for-businesses/Small-Business—expanding-accelerated-depreciation/

*This tax information is general in nature and based on present taxation laws and may be subject to change. You should seek independent professional tax advice before making any decision based on this information.