Chartered Accountants Australia and New Zealand (CAANZ) has sounded a note of caution to those thinking of immediately buying new assets based on the Budget's instant asset deduction for small businesses, announced last week.
In Tuesday's Budget speech, the Treasurer announced that businesses with a turnover of less than $2 million can immediately deduct most assets acquired and installed for less than $20,000.
However, Michael Croker, tax leader at Chartered Accountants ANZ, said “the income tax law has had these types of concessions before, although not as generous".
"CAs know from experience that clients get the best outcomes when they take a little while to plan how best to respond," he said.
Mr Croker also warned that the Australian Taxation Office would be monitoring carefully how taxpayers respond to the new tax concession.
“$20,000 is a lot of money to deduct for each item acquired, and the ATO’s job is to ensure that only genuine eligible small businesses get the concession. Taxpayers don’t always appreciate the huge amount of data the ATO collects to monitor business spending patterns,” he said.
Mr Croker’s comments come after tax accounting group H&R Block issued a statement warning of potential “traps” in the federal Budget's tax breaks.
In a statement, CAANZ highlighted key areas which the group believes the ATO will be monitoring, including:
• Falsely representing that annual turnover is under $2 million
• Breaking down one large purchase into multiple purchases of less than $20,000
• Bringing pre-Budget equipment purchase contracts into the post-Budget eligibility period
• False invoicing
• Quoting a false Australian Business Number
• Non-business taxpayers misrepresenting their eligibility for an Australian Business Number
• Buying equipment for personal or home use, not for business use
• Private buyers giving funds to small business taxpayers, asking them to buy equipment on their behalf.
Mr Croker said these types of evasion practices are not new, but the Budget announcement could encourage some to think about making such arrangements.
“Don’t do dodgy tax deals. The ATO will rightly impose substantial penalties for such behaviour,” Mr Croker said.
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