What tax breaks do businesses get?

[ford man xf]

What kind of tax breaks do businesses get, for example I know farmers get a rebate on diesel and I know that leasing a forklift can be beneficial for tax purposes rather than actually buying one.

Does depreciation apply to the actual businesses premises?

Any business owners out there, I've always been interested in business and always wondered if the risk of starting one is worth it.

[ratter]

it really depends on the business, you should really speak to an accountant as many people pass on stories that are not true or not legal

[wodahs]

also there are other places to check out as well like the business enterprise centre and or the small business development centre in your state
I came across these groups whilst I've been looking info about setting up a small farm enterprise (primary producer)

[AJ09]

As already mentioned, it's worth having a chat with an Accountant.

The tax situation also depends on how the business is structured (eg: sole trader, company etc) Again, an Accountant can advise the most suitable option.

[nuthin' fancy]

Simply, you can claim any expense involved in generating income. The rebate you get is simply based on your marginal tax rate. If you have choice between using cash or debt for a purchase, use cash, as long as it doesn't leave you short.

There is a complete misunderstanding around 'writing things off', some seem to think it means you get it for free.

[ILLaViTaR]

All of them.

[pajoda]

Yep, writing off is a tax deduction at the marginal rate, it isn't recovery costs. Seek professional guidance.

[ford man xf]

Thanks for all the replies.
I'm not actually starting or a business or looking for professional advice, I was just more after a discussion on the topic as I find it interesting. We often here from business owners about the associated costs of running a business such as workcover premiums, wages, loading, superannuation etc. but then there are benefits of owning a business such as tax cuts, but do these tax cuts make a big enough difference, employees often fail to realise the true cost of there employment, I often have discussions with people who complain they only got a $40 a week payrise, but that's what they take home after tax, once you add it all up it's an expensive payrise, but people are happy to whinge that they don't get enough, owning a business is tough from what I have been told.

[ratter]

Originally Posted by nuthin' fancy

There is a complete misunderstanding around 'writing things off', some seem to think it means you get it for free.

this is the biggest misconception

[Rambunctious]

Originally Posted by ford man xf

What kind of tax breaks do businesses get, for example I know farmers get a rebate on diesel and I know that leasing a forklift can be beneficial for tax purposes rather than actually buying one.

Does depreciation apply to the actual businesses premises?

Any business owners out there, I've always been interested in business and always wondered if the risk of starting one is worth it.

Interesting that you think leasing is beneficial for tax when in fact it is not.

People (and Accounts) say when you lease you get everything back but you only get the tax back, not the complete payment, so at the Company tax rate of 30%, if you spend $10,000 in a year leasing a forklift for example, you get only $3000 back.

Same applies to personal tax rates(if you don't run the business under a company structure) when you consider that the personal rate across the board is 30% up to $175000 income.

I have always looked at leasing as a means to have what you need for the business when you don't have the cash or the capacity to borrow and pay back the principle amount as well as interest.

As has already been mentioned, if you can afford to buy outright then do so.

Also consider if you buy something, either by way of cash or borrowings, you can depreciate the item each year, but by leasing you do not get the depreciation benefit which can be 20-30% on the purchase price in the first year then the same % on the written down price from then on.

[FPV+fteT3]

Mate talk to a good accountant that is rule 1. I lease my vehicles to allow cash to be used for other things. Similarly there are leases and then there are leases, in my situation I use a chattel morgage set up. For what its worth I consider it to be the best way to own a new vehicle and reduce yout tax obligations and you claim back all the interest paid over the lease term, depreciate the asset same as if you paid cash, so the cost is same as paying cash but spread out over 5 years leaves your cash money for other things.

[buggerlugs]

What tax breaks do businesses get ? Not enough..............

[Crazy Dazz]

Not clear on exactly what you mean by “breaks,” but the basic answer is “none.” There is certainly no tax based reason to go into business.
In fact (having been there and done that) I reckon you ‘d be mad to become a small businessman in Australia, because all the other laws are stacked against you.
Why risk your capital and your livelihood, and work your **** off trying to sell your services to an unappreciative public, when you can work for wage, demand job-security, and spend your time whinging and moaning that you work too long and don’t get paid enough.

[ratter]

I don't think Crazy Dazz is too crazy,

I love how most people think because your self employed, your loaded

[zilo]

I run a family business that has turned over more than $50m since incorporation.

Basically for starters you get a 10 percent discount on everything you buy...the GST.

It really is on everything invoiced in your business name, regardless of whether it generates income or not.

If you want to buy expensive $300 coffee in your reception area then you aren't doing anything illegal, you're just a bad business operator who doesn't know how to make a profit....plenty of Alan Bond's who have gone bankrupt and bought million dollar paintings for the conference room....

You buy everything with money before paying tax, big difference.

Joe Bloh pays tax on his wages then tries to claim it back from the tax office.

Businesses don't pay tax on the money before spending it.

Means you have 30% more money to buy things with.

Also...forget talking to accountants about making a profit, they only record history, not predict it.

[Crazy Dazz]

Originally Posted by zilo

I run a family business that has turned over more than $50m since incorporation.

Basically for starters you get a 10 percent discount on everything you buy...the GST.

It really is on everything invoiced in your business name, regardless of whether it generates income or not.

If you want to buy expensive $300 coffee in your reception area then you aren't doing anything illegal, you're just a bad business operator who doesn't know how to make a profit....plenty of Alan Bond's who have gone bankrupt and bought million dollar paintings for the conference room....

You buy everything with money before paying tax, big difference.

Joe Bloh pays tax on his wages then tries to claim it back from the tax office.

Businesses don't pay tax on the money before spending it.

Means you have 30% more money to buy things with.

Also...forget talking to accountants about making a profit, they only record history, not predict it.

There is no 10% “discount.” You claim an ITC on your inputs and charge GST on your outputs, and this ONLY applies to your business inputs.
Yes, with a business there are more opportunities to commit tax fraud.
As Zilo says, you can run your business in a very expensive fashion (Nice office, big desk, top computer) but keep in mind that all that gets you is a tax DEDUCTION for the money you have wasted.
There CAN be cashflow advantages, but it is only a timing difference.

If you have the ideas, the innovation, the capital and work ethic to develop a $50M turnover, then your own business is the only way to go. You won’t make that much coin working for the man. but (in regards to your original question) there are no real tax advantages to having a business.
Furthermore, if your choice is between a working as a leading hand for wages, or running your own 1~2 person business, the former is a much safe and easier option.

[zilo]

Originally Posted by Crazy Dazz

There is no 10% “discount.” You claim an ITC on your inputs and charge GST on your outputs, and this ONLY applies to your business inputs.

Not being personal mate, but disagree with everything you say...

It is a 10% discount.

I can claim 10% GST refund on all my purchases and not make a single sale all year....so zero GST remittance.

Anyone can get an ABN and be registered for GST.

With zero sales it is a pure discount.

Originally Posted by Crazy Dazz

Yes, with a business there are more opportunities to commit tax fraud.
As Zilo says, you can run your business in a very expensive fashion (Nice office, big desk, top computer) but keep in mind that all that gets you is a tax DEDUCTION for the money you have wasted.

It is not tax fraud to be inept at running a business.
Any tax invoice in the name of the business is a reduction in income assessed, regardless of how stupid the purchase is.

Not so for individuals who must prove it as a legit expense.

Originally Posted by Crazy Dazz

there are no real tax advantages to having a business.

Unbelievably bad advice...suggest you lookup the company tax rate versus individual tax rates....and family trusts.

Originally Posted by Crazy Dazz

Furthermore, if your choice is between a working as a leading hand for wages, or running your own 1~2 person business, the former is a much safer and easier option.

You have got to be joking, starting a business is the single best thing that anyone can do in a capitalist economy.

Ask a leading hand at Ford how safe ann option it is to work for wages?

[cs123]

Originally Posted by zilo

Not being personal mate, but disagree with everything you say...

It is a 10% discount.

I can claim 10% GST refund on all my purchases and not make a single sale all year....so zero GST remittance.

Anyone can get an ABN and be registered for GST.

With zero sales it is a pure discount.



It is not tax fraud to be inept at running a business.
Any tax invoice in the name of the business is a reduction in income assessed, regardless of how stupid the purchase is.

Not so for individuals who must prove it as a legit expense.




Unbelievably bad advice...suggest you lookup the company tax rate versus individual tax rates....and family trusts.



You have got to be joking, starting a business is the single best thing that anyone can do in a capitalist economy.

Ask a leading hand at Ford how safe ann option it is to work for wages?

How do you reconcile this position with your stance on Novate Leasing. It seems you're advocating creating accounting to receive a tax benefit.

[Rambunctious]

[QUOTE=zilo;4897974]I can claim 10% GST refund on all my purchases and not make a single sale all year....so zero GST remittance.

Anyone can get an ABN and be registered for GST.

With zero sales it is a pure discount.



Don't see how you cannot make a sale all year and still turnover $50 mill after all, turnover is sales.

[aussiblue]

All I can say as an accountant, is tax reduction is the wrong objective in running a business; your main focus should be on making a profit. Too many businesses get into trouble by focussing on trying to avoid tax rather than making money. Your accountant will make sure you pay no more tax than you have to and if you end up paying lots of tax it is because you a doing well and making good returns and making real money.

[ford man xf]

Originally Posted by Rambunctious

Interesting that you think leasing is beneficial for tax when in fact it is not.

I was told this was the case at work because leasing provided a better tax return, this what the old manager was saying, but then again I dont think he had much of a clue hence why he is not the manager anymore.

[ford man xf]

Originally Posted by Crazy Dazz

Not clear on exactly what you mean by “breaks,” but the basic answer is “none.” There is certainly no tax based reason to go into business.
In fact (having been there and done that) I reckon you ‘d be mad to become a small businessman in Australia, because all the other laws are stacked against you.
Why risk your capital and your livelihood, and work your **** off trying to sell your services to an unappreciative public, when you can work for wage, demand job-security, and spend your time whinging and moaning that you work too long and don’t get paid enough.

Your on the same thinking as me, and seeing & hearing first hand how ungrateful some workers can be it makes me wonder if I could ever handle having a business, the risk is huge, you put everything on the line, I know of someone that sold their house and good car to keep the business going and the workers still whinged about not getting a payrise that year, there are so many fees, and even when you have a lazy worker that won't pull their weight there is almost nothing you can do to get rid of them, even after 2 written warnings you have to have "good reason" to sack them legally, and even then they can take you to the tribunal which costs you even more money. It's always annoyed me that even though some people do the same job but work harder than their colleagues they are still on the same wage, if you try and pay the good workers better and look after them it's deemed unfair, workchoices would have been a good addition for businesses so you could workout an individual contract for your workers, everyone would still get the base wage that they are entitled too, but at least then you could look after workers who deserve it.

[ford man xf]

Originally Posted by zilo

I run a family business that has turned over more than $50m since incorporation.

Basically for starters you get a 10 percent discount on everything you buy...the GST.

It really is on everything invoiced in your business name, regardless of whether it generates income or not.

If you want to buy expensive $300 coffee in your reception area then you aren't doing anything illegal, you're just a bad business operator who doesn't know how to make a profit....plenty of Alan Bond's who have gone bankrupt and bought million dollar paintings for the conference room....

You buy everything with money before paying tax, big difference.

Joe Bloh pays tax on his wages then tries to claim it back from the tax office.

Businesses don't pay tax on the money before spending it.

Means you have 30% more money to buy things with.

Also...forget talking to accountants about making a profit, they only record history, not predict it.

Thanks for the info. With depreciation what does this apply to? Vehicles, property etc. what else?

[zilo]

Originally Posted by cs123

How do you reconcile this position with your stance on Novate Leasing. It seems you're advocating creating accounting to receive a tax benefit.

Only mugs lease cars mate.
Smart operators just buy them outright.

When you lease, the leasing company gets the depreciation.
Because they are the owners of the car, not you.
That is the lion's share of the tax advantage.

[zilo]

Originally Posted by ford man xf

Thanks for the info. With depreciation what does this apply to? Vehicles, property etc. what else?

Stock on hand comes to mind, it depreciates too...

Spare parts for example drop in price because in some industries they become last years model.

Tools and test equipment, laptops and IT gear...coffee machines...fax machines...you name it...it depreciates.

I am currently depreciating a pallet (38) of 200 watt solar panels that haven't even been installed.

In 5 years they will have paid for themselves without generating any power whatsoever.

[cs123]

Originally Posted by zilo

Only mugs lease cars mate.
Smart operators just buy them outright.

When you lease, the leasing company gets the depreciation.
Because they are the owners of the car, not you.
That is the lion's share of the tax advantage.

No mate, that wasn't what I meant. You have stated that people that Novated cars were tax cheats in a previous thread.

Couldn't give a damn if car expenses tax cheats no longer get a free lunch.

Yet you are quite OK to play loose with what a business can legitimately claim as business expense.

It is not tax fraud to be inept at running a business.
Any tax invoice in the name of the business is a reduction in income assessed, regardless of how stupid the purchase is.

So it seems if a PAYG person tries to minimise their tax then they are cheats but if you have a ABN then you're clever.

[zilo]

Originally Posted by Rambunctious

Don't see how you cannot make a sale all year and still turnover $50 mill after all, turnover is sales.

You have read my comment out of context.

It was a comment based on one possible scenario, not my actual circunstances.

However, I'll run with it....

You buy a $100k FPV, in that $100k you paid $10k of GST...
You submit a BAS that month claiming back the $10k GST...
Cheque arrives amonth later for $10k.....

You still have the FPV in your warehouse...
You just got your 10% discount and its in the bank.

You are holding an FPV potentially for ever at a discount.

You drive it and it depreciates at 22% per annum...

5 years later its a pile of junk and you sell it for a thousand bucks.

You send them 10% of a thousand bucks ($100) as the GST on the sale.



So you saved 10% less a dribble, and you didn't make a sale all those years.....

Worth getting an ABN instead of a novated lease? You betcha..

Welcome to the new tax system...the GST...

[zilo]

Originally Posted by cs123

No mate, that wasn't what I meant. You have stated that people that Novated cars were tax cheats in a previous thread.

that's what the government was saying about people claiming deductions and not actually using the car for what was being claimed.

Originally Posted by cs123

Yet you are quite OK to play loose with what a business can legitimately claim as business expense.

Me "playing loose" ??? it's the law, welcome to the new tax system 2001

I had a team of ATO suits explain these advantages to my business in exactly the way i am presenting it here.

Originally Posted by cs123

So it seems if a PAYG person tries to minimise their tax then they are cheats but if you have a ABN then you're clever.

Tell it to the law makers matey.

I just call it like it is...

[tranquilized]

Originally Posted by aussiblue

All I can say as an accountant, is tax reduction is the wrong objective in running a business; your main focus should be on making a profit. Too many businesses get into trouble by focussing on trying to avoid tax rather than making money. Your accountant will make sure you pay no more tax than you have to and if you end up paying lots of tax it is because you a doing well and making good returns and making real money.

Very true. I remember a meeting my business partners and I had with an accountant just after we had bought our business, about 10 years ago. We were very young and green, just going over what we needed to do to get the business running right etc.

As we were leaving the accountant said to us something along the lines of "I'll help get you up and running and hopefully you'll all be paying a lot of tax real soon"

We all looked at each other like it was a real strange thing to say, but of course if you're paying a lot of tax as a business owner, that means you're making a lot of money

I still dont pay very much tax...

[tranquilized]

On depreciation;

A business owner can claim depreciation on whatever really. Capital purchases in particular are depreciated. The amount of value they lose each year is estimated, and that dollar figure becomes a claim. With property, the fittings and fixtures, or the building is depreciated. While the value of the property overall will usually appreciate, the buildings on the land from which the business generates its income will age, wear out, eventually require renovation or re-building, hence why they can be depreciated. Claiming on deprecation can take a large chunk out of a business owners tax bill, it sure does with mine.