Possible Delays to New Equipment Purchases

Currently, wait times for purchase new equipment from overseas could mean that you may be waiting up to 12 months. If you are a Formworker, why not take advantage of this and secure second-hand ex-rental equipment from Cassaform prior to the 30th June and obtain a 100% tax write off in this financial year.

Cassaform currently has Conventional Frames system, Slabform, Peri Skydeck and Aluminium & Steel props for sale.

Cassaform recommends that you seek advice from your accountant however, as a basic example of how the simplified Depreciation Pool works read below.

Simplified Depreciation Pool for Business with Turnover up to 10 million & Loss Carry Back

  • ABC Constructions has an annual turnover of $9.5million.
  • Over the last few years of trading ABC Constructions has purchase varies assets to support their construction projects.  Typically, ABC depreciates all of these assets using the simplified depreciation pool (claiming 30% diminishing value depreciation each year).
  • The closing balance on this depreciation pool as at 30 June 2020 was $2.5million.
  • Notwithstanding the challenges of the COVID environment through the 2021 FY, ABC Constructions has had a busy year with all the government generated infrastructure projects which has resulted in a trading profit of $1 Million for the year ended 30 June 2021.
  • This would generally result in a tax bill of $260,000 (i.e., 26% company tax rate for 2021), however under the new tax incentives scheme, ABC Constructions has an option to claim a 100% full expensing of the entire depreciation pool balance of $2.5 million, equalling the total Written Down Value (WDV) of all Assets owned.
  • This ‘one off’ tax incentive therefor allows ABC Constructions to show an actual LOSS for tax purposes of $1.5 million in 2021 (i.e., $1mil profit less the $2.5 million tax write off).
  • Not only does this mean that ABC Constructions will not have to pay the $260,000 tax bill for 2021, but they will also be able to ‘carry back’ the $1.5 million tax loss on any tax that ABC Constructions paid on profits for the prior 2 financial years (i.e., 2019 & 2020).
  • So, if ABC Constructions did fact make profits in both the 2019 & 2020 financial years, then the temporary loss carry-back incentives, provides ABC Constructions the opportunity for the total tax paid for those 2 years to be repaid as a refund once ABC Constructions has completed and lodged their 2021 Tax Returns.
  • In the event that ABC Constructions did not have sufficient losses in 2021 to fully recapture the prior 2 years of tax paid, then ABC Constructions also has until June 30th 2023, to do so.
  • Alternately, if the tax losses in 2021, 2022 & 2023 were not fully utilised through any “carry back” opportunities, those tax losses would simply be carried forward to offset future profits.

 Disclaimer

The information above is provided as an example at a conceptual level only and is not provided as formal investment or tax advice. We advise all business owners to seek independent tax advice with respect to these matters.

by Cassaform