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How to write off business costs

7 Nov 2011 |

When the mining tax legislation was introduced several other tax based pieces of legislation were also introduced. One of these was the changes to small business asset purchase write off amounts from $1000 up to $6500.

Q. We recently leased an office to run our small business. After GST has been deducted we spent $4500 on floor boards, $3000 on painting and $2500 of partition materials which we put up ourselves. Can we claim these individually under the $6000 write off tax concession or do we have to capitalise them and write them off as depreciation?

A. If the new legislation relating to small business asset write off amounts was already passed by both houses of parliament you may have been able to claim these costs. Unfortunately you will need to capitalise these items as this new measure will apply to assets purchased after 1 July 2012.

Q. I commenced running my own business in October of last year and use my own car for business purposes. Around 90 per cent of the travel is business related. In August I had to pay $500 for a new muffler for the vehicle. I was wondering if I could claim 90 per cent of the $45 GST amount included in the cost of the muffler?

A. As long as you have kept a log book for 12 weeks, that supports the 90 per cent business usage figure, you will be able to claim 90 per cent of the $45 GST included in the cost of the muffler.

Q. My colleague and I are looking at setting up our own Events and Travel business and are unsure of the best structure as tax is going to play a major role in the structure we choose as well as professional liability insurance. We do not want our personal assets at risk. There are some licenses we need to obtain before we can start trading and this is currently being researched but as for the structure we are still unsure if a partnership or company is the best route to take. We do have an investor who will be providing the initial funding and will a hold majority of the shares with the option for us to purchase them back at a later date, so how will this affect our structure?

A. Given your concern about limiting your legal liability a structure with a company in it will be best. Unfortunately if you choose to operate through a company only you could end up with a large capital gains tax bill when and if you sell the business.

Another option is to use a unit trust with a company acting as trustee, but there are still limits on what small business capital gains tax concessions you will be eligible for in a unit trust. The best structure from a capital gains tax point of view is a partnership of family trusts, with a company acting as trustee for the trusts and as nominee for the partnership.

Questions on small business tax or other issues can be emailed to business@taxbiz.com.au


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