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Using your company’s money or assets Posted on July 9, 2020

Company assets

If your business is fortunate to have some cash set aside that could be invested into your people or your business assets, there are a couple of things you should check before making any transactions.

Any cash transfer to an individual from the company needs to be properly processed as salary, wages, director’s fees or dividends. A distribution statement should be issued to the recipient and the additional income should be included in the recipient’s income tax return.

Any investment in a business asset that may also be used for personal purposes should be in the form of a pre-approved Fringe Benefit, such as a car for an employee. The Company must lodge an FBT return and pay if it has an FBT liability. The recipient of the benefit does not need to report the fringe benefit in the income tax return, unless it is reported on the income statement.

The Instant Asset Write-Off scheme for small business has been extended until the end of the calendar year. This means that eligible businesses with less than $500 million aggregated turnover can purchase an asset for their business for up to $150,000 between now and 31 December can claim it as a deduction.

Can you buy a car under the Instant Asset Write Off scheme? This is the $60,000 question.

It must cost under $59,136 (inclusive of GST) between now and 31 December 2020. A car costing more than $59,136 can still be acquired but your write-off and GST claim is limited to this amount.

If the car is used for a sole trader or a partner in a partnership, the deduction would apply to the portion used for business use. If the sole trader or partner uses it for 75% business use, the business can claim a deduction on 75% of the cost of the car.

If a car is used by an employee then the full cost can be claimed however the employer would be required to pay fringe benefits tax.

If you would like to invest in a vehicle for the business that is NOT a passenger vehicle, then the car limit does not apply.

Other types of depreciating assets you could include in the scheme include

  • machinery and equipment
  • motor vehicles
  • furniture, carpet and curtains
  • motor vehicles
  • furniture, carpet and curtains
  • computers and computer accessories, including keyboards
  • landline phones and headsets
  • mobile phones, tablets and styluses.

If you’d like some advice on the best course forward on company asset structure or business record keeping, Debbie Bloffwitch is an expert in company accounting.

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