Posts Tagged Small Bussiness

Important changes to Australia’s insolvency laws commenced operation on 1 January 2021. The Federal Government has called these the most important changes to Australia’s insolvency framework in 30 years.

The measures apply to incorporated businesses with liabilities less than $1 million. The intention is that the rules change from a rigid “one size fits all” model to a more flexible “debtor in possession” model, which will allow eligible small businesses to restructure their existing debts while remaining in control of their business. For those businesses that are “unable to survive”, a new simplified “liquidation pathway” will apply for small businesses to allow faster and lower-cost liquidation.

The measures are expected to cover around 76% of businesses currently subject to insolvency, 98% of which have fewer than 20 employees. The new rules do not apply to partnerships or sole traders.

To be eligible to access this new process a company must:

• be incorporated under the Corporations Act 2001;
• have total liabilities which do not exceed $1 million on the day the company enters the process – this excludes employee entitlements;
• resolve that it is insolvent or likely to become insolvent at some future time and that a small business restructuring practitioner should be appointed; and
• appoint a small business restructuring practitioner to oversee the restructuring process, including working with the business to develop a debt restructuring plan and restructuring proposal statement.

If you’ve purchased assets for your business, remember that you may be eligible to claim an immediate deduction in your 2019–2020 and 2020– 2021 tax returns under the instant asset write-off, which was recently further expanded.

From 12 March to 31 December 2020 inclusive, the instant asset write-off threshold for each asset increased to $150,000 (up from $30,000) for business entities with aggregated annual turnover of less than

$500 million (up from $50 million). To get it right, remember:

• check if your business is eligible;
• both new and secondhand assets can be claimed, as long as each asset costs less than $150,000;
• assets must be first used or installed ready for use between 12 March and 30 June 2020 (to claim for the 2019–2020 year) or from 1 July to 31 December 2020 (to claim for the 2020–2021 year);

• a car limit applies for passenger vehicles;
• if the asset is for business and private use, only the business portion can be claimed;
• you can claim a deduction for the balance of a small business pool if its value is less than $150,000 at the relevant date (before applying depreciation deductions); and
• different eligibility criteria and thresholds apply to assets first used or installed ready for use before 12 March

If you’ve purchased assets for your business, remember that you may be eligible to claim an immediate deduction under the instant asset write-off, which was recently expanded.

From 12 March to 30 June 2020 inclusive, the instant asset write-off threshold for each asset increased to $150,000 (up from $30,000) for business entities with aggregated annual turnover of less than $500 million (up from $50 million).

To get it right, remember:

• check if your business is eligible;
• both new and secondhand assets can be claimed, as long as each asset costs less than $150,000;
• assets must be first used or installed ready for use between 12 March and 30 June 2020;
• a car limit applies for passenger vehicles;
• if the asset is for business and private use, only the business portion can be claimed;
• you can claim a deduction for the balance of a small business pool if its value is less than $150,000 at 30 June 2020 (before applying depreciation deductions); and
• different eligibility criteria and thresholds apply to assets first used or installed ready for use before 12 March