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Re: Instant Asset Write Off - Small Business and Employee

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Newbie

Views 557

Replies 2

Starting up a small business whilst also working as an employee. I am an electrician and carry tools to work daily so i can claim my vehicle depreciation as well as all vehicle expenses by logbook method. However, i am wanting to start my own business whilt also working as an employee for primary income as i start the business.

If i earn 75% of my income as an employee and 25% as a small business, how does this work with a $30,000 instant asset write off?

I need to buy a new utility vehicle, tools, etc. So my deductions may come to $40,000 that i would intend to write off instantly. However, as the wnd od the tax year is fast approaching and i have not actually started the business yet, my deductions of $40k will most probably exceed the income generated by the small business. However my income as an individual will be far greater and i would like to use this deduction to reduce my taxable income as an employee also.

Am i eligible to do thos as i meet the requirement for the instant asset write off as i am a small business entity however i am wanting to apply to deduction to my income as an employee where i am being taxed at 37-45 cents in the dollar.
1 ACCEPTED SOLUTION

Accepted Solutions

Best answer

Devotee

Replies 0

@Joshuadavies2 

In addition to the points from @macfanboy you should be mindful of the non-commercial losses rules . If the business activity you have generates a loss and is considered to be a non-commercial loss, then this loss cannot offset your income from other sources (eg. your salary & wages income, interest, dividend etc) but is carried forward to use in later income years.

 

To ensure the losses are not considered non-commercial losses you will need to satisfy any one or more of these four tests:  

  • Assessable income test (the assessable income from the activity is >$20,000)
  • Profits test (profit in the last 3 out of 5 years) - would not apply to you since it's a new business
  • Real property Test (real property ie. land, buildings etc. with a value of at least $500,000)
  • Other assets test (other assets in the business ie. equipment, trading stock, trademarks etc with a value of at least $100,000)

 

Summary

  • Check if you pass at least one of the four tests.
  • If yes - you can offset the loss with your other income in the year you generate the loss.
  • If no, you cannot offset the loss against other types of income but it is carried forward so you can use in a later income year.
2 REPLIES 2
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Taxicorn

Replies 0

 I am an electrician and carry tools to work daily so i can claim my vehicle depreciation as well as all vehicle expenses by logbook method.

 

Only if they are bulky, weigh more than 25kg and you don't have a secure lock up at work - The ATO can query this.

 

how does this work with a $30,000 instant asset write off?

 

You would claim the percent that they are used for the business, regardless of income.

 

Any other purchases need to be apportioned between work and business based on use not income.

 

 

Best answer

Devotee

Replies 0

@Joshuadavies2 

In addition to the points from @macfanboy you should be mindful of the non-commercial losses rules . If the business activity you have generates a loss and is considered to be a non-commercial loss, then this loss cannot offset your income from other sources (eg. your salary & wages income, interest, dividend etc) but is carried forward to use in later income years.

 

To ensure the losses are not considered non-commercial losses you will need to satisfy any one or more of these four tests:  

  • Assessable income test (the assessable income from the activity is >$20,000)
  • Profits test (profit in the last 3 out of 5 years) - would not apply to you since it's a new business
  • Real property Test (real property ie. land, buildings etc. with a value of at least $500,000)
  • Other assets test (other assets in the business ie. equipment, trading stock, trademarks etc with a value of at least $100,000)

 

Summary

  • Check if you pass at least one of the four tests.
  • If yes - you can offset the loss with your other income in the year you generate the loss.
  • If no, you cannot offset the loss against other types of income but it is carried forward so you can use in a later income year.