15 May 2015
Transcript - #2015055, 2015

Interview with Ross Greenwood, 2GB Money News, Sydney

SUBJECTS: Jobs and Small Business package - Asset depreciation

ROSS GREENWOOD:

The Small Business Minister Bruce Billson has jumped back on the line for us to give us a hand tonight. Hello Bruce how are you?

MINISTER BILLSON:

Ross great to be back with you and your listeners.

ROSS GREENWOOD:

Good thank you. So anybody wants to jump on the line? Anybody confused? Anybody got some issues to what you can write off, to what you cannot write off? Other bits and pieces in regard to the tax cuts, what that means to you.

Jump on the line if you have got any questions. He has got a few minutes now for us and we thought we would get him back on.

Bruce, just explain, have you had a few calls about all this today or not?

MINISTER BILLSON:

A couple. We have had people extremely positive and optimistic. A little bit of confusion about whether the $20,000 is a cap, an aggregated cap. And we are able to explain no, that is for individual transaction for business related assets up to $20,000 and you can go again and again and again. As long as you can pay for it of course.

ROSS GREENWOOD:

I have got to say I had to go on the today show with Karl Stefanovic and Lisa Wilkinson. Particularly Karl, he just could not work it out.

He was trying to work out that he and I had set up a lemonade stand and all of a sudden we were suddenly getting money back from the Government and I am going ‘no business does not work that way Karl, it just does not’.

MINISTER BILLSON:

This is what I have had a bit of traffic from too. A couple of the journos up here in the Press Gallery have said I have got a dormant ABN, I might just use that and whip that out and go and buy some new desktop publishing gear and the like, and I go no, no, no, no it is not a grant from the government.

You still need to earn income so that you are liable for income tax against which you can deduct the cost of the asset. It has to be business related.

ROSS GREENWOOD:

There is one other part about this Bruce and that is, I understand that you are going to have the Tax Office monitor this very closely. In other words, you just cannot bring up a dormant Australian Business Number for example and say ‘right I am a business and I am going to try and apply for one of these’.

It is just not going to work that way is it? You have got to be an active business operator.

MINISTER BILLSON:

Active trading. You have got to be fair dinkum in business and not just have an ABN in your back pocket.

And as we were talking about earlier, you need a business income stream that is linked to the active trading in your enterprise that you can then lay off whatever income tax liability, your company tax liability you have by the deductions made possible by the measure last night.

ROSS GREENWOOD:

Correct because if you are losing money in the company and you then go and spend another $20,000 well ok you get a bigger tax loss but you actually do not get any benefit until you earn some dough.

MINISTER BILLSON:

In some structures, and I do not want to confuse your listeners, there is a capacity to carry forward some of those losses into subsequent years but in terms of the cash flow benefit, if you are not in positive territory, if you have not got black ink that is generating a tax liability, you do not have a whole lot to write the asset purchase off against and you might have to explain what you are up to to other people interested in your business.

ROSS GREENWOOD:

Correct. Ok Bruce Billson the Small Business Minister on the line taking your calls. Plenty of them around the place as well. Let us start off with Sarah who is in Newcastle. Good day Sarah.

CALLER:

Hi how are you?

ROSS GREENWOOD:

Good thank you.

CALLER:

That is good. I have got two questions.

The first one I had – there is an announcement about employing people over 50 in your business, there is a $10,000 grand rebate.

MINISTER BILLSON:

Yes Sarah that is right. There is work going on in trying to reshape the way Australians can get into work and you might remember there was something called Restart. That was a program that offered some financial incentives. That is what we are trying to reshape.

Some of those benefits were a bit down the track so we are trying to pull those benefits forward. There are some criteria about how long the people would need to have been out of work.

CALLER:

I heard it was about 6 months.

MINISTER BILLSON:

That is right. We had a different scheme where it was a big back end loaded, if I could use that term. You would make that recruitment decision and the incentives came a bit late. So we are trying to pull that forward and make it more available and accessible for small businesses.

ROSS GREENWOOD:

Alright there you go Sarah.

I tell you what, I am over 50 Sarah so what say you employ me and I give you an extra $10,000 grand to employ me, that way you have got $20,000 to buy something and then you can write it off instantly against your tax and we are all winning. What do you reckon?

MINISTER BILLSON:

Just so we are all clear, the payments vary. A wage subsidy is available for about $6,500 and that is really focused on a larger proportion of the subsidy being up front. It used to be $10,000, that was back end loaded. We were getting feedback from people that was not what they wanted and that is why there has been some adjustments to that program.

ROSS GREENWOOD:

There you go Sarah he has got it you see even before we started trying to cook up a scheme between the two of us. Thank you for that call very much.

Let us go down to Mark who is in Frenchs Forest. Good day Mark how are you?

CALLER:

Hi Ross. Just a question – that $20,000 is that including GST or ex GST?

MINISTER BILLSON:

It is the value of the transaction so that would be including GST in the ordinary course of events and as you know as a business you can claim the GST inputs back.

ROSS GREENWOOD:

There you go Mark. Did that make sense? You can have a second one while you are there Mark.

CALLER:

The goods, do they have to be new versus used?

MINISTER BILLSON:

No they do not have to be new, but you do have to prove that they are an asset that is contributing to an actively trading business Mark. If you are looking at getting an old gyrocopter or something that you had a bit of fun with a bunch of years ago it might be hard arguing that is what you need at a hairdresser or something like that.

ROSS GREENWOOD:

No that is probably true. Tell you what we will leave Mark there. Thank you so much for that. Bruce Billson with us. Plenty more calls on the board.

Let us go to George who is in Mascot. Good day George.

CALLER:

Good day Ross. My question is basically, does the item have to be one item? In other words, we are a manufacturing distributor and we are looking to buy some equipment and if the vendor of the equipment that we are buying it from is prepared to give us say three invoices of $20,000 and identifies certain parts of this machinery that we need in that, could we basically make this work for us and then basically write-off the value of that before the end of the financial year?

MINISTER BILLSON:

No I think that might have been a bit too cute by a half. It would need to be an asset that is functional in its completeness for the transaction otherwise you would find people getting a bit of a lathe here, a bit of an engine component here and something else.

It would need to be complete and able to function as a contributing asset to your actively trading business.

ROSS GREENWOOD:

And remember George one thing – it is not Bruce Billson that you are going to have to answer to, it is the Tax Office. And that I have got to tell you is an altogether more scary prospect if you are up against them George so just watch your step along the way.

Thank you for that call.

MINISTER BILLSON:

The other thing too Ross if I could just add is if you and I went and got a bobcat or something like that that was functional and we got a second hand one under 20,000 grand, it is quite legitimate for us to then go and undertaken another transaction to get say a hydraulic post hole digger or something like that as an additional item because each of them are quite a distinct transaction in their own right.

Now with that kind of detail, always best to get sound advice from your accountants because as you pointed out ultimately the tax commissioner is the one that makes those calls. I am here to be helpful.

ROSS GREENWOOD:

Geez isn’t that nice. I am a politician and I am here to help. I love that. Where have we ever heard that before?

MINISTER BILLSON:

I do not know, I reckon it has been used before.

ROSS GREENWOOD:

There you go.

John in Waterloo. Good day John, how are you doing?

CALLER:

Hello Ross how are you?

ROSS GREENWOOD:

Very well thank you.

CALLER:

Just a question for Minister Bruce. If somebody runs a truck or a taxi business, if they purchase parts for that truck or that taxi business, does that come under that $20,000 cap?

MINISTER BILLSON:

Ordinarily not John because that would be repairs and maintenance, and you would find with advice from your accountant that is an expendable item anyway.

ROSS GREENWOOD:

There you go John. If it is an expense remember, a repair or a piece of maintenance, you can already deduct it in that year. These are assets that would normally be depreciated over four years that we are talking about here that now if you have got an asset of up to $20,000 but your turnover is under $2 million in your business, you can actually write it off the next time you put in a tax form.

MINISTER BILLSON:

Just on that Ross if I could. Remember we talked last night about an asset that was over $20,000 and we touched on what is known as the pooling arrangements, that allows you to write-off 15% in the first year, then put the balance of the asset in the pool and take 30%, 30%, 30% off. If you asset pool becomes less valuable than $20,000 then you can wipe that off as well.

So that is one for the accountants. A little too much detail for most people but something that would complete something we discussed last night.

ROSS GREENWOOD:

That is good. I tell you what that is not a bad one either.

Let us go to Peter who is in Alexandria now. Thank you for the call Peter.

CALLER:

How are we gentlemen?

ROSS GREENWOOD:

Good thank you.

MINISTER BILLSON:

Good day Peter.

CALLER:

Just a quick one. We are looking at putting new signage on our business. Can signage be classed as part of that $20,000?

MINISTER BILLSON:

Tricky one. I might steer clear of that one and steer you towards your accountant. There are issues around fixtures and fittings on a physical asset and then there is signage that is relocatable and moveable. There is a whole lot of tax expertise in defining one and the difference between that from another.

So I would say if you are looking to get specific advice about that talk to your accountant. They will be able to reference some of the rulings that have already been a part of that discussion.

But generally, if you are talking about fixtures and fittings that is not normally the type of thing that would be captured by instant asset write-off. But if it is relocatable or moveable or has some broader purpose, that is where you need to get the advice from your accountant Peter.

ROSS GREENWOOD:

There you go Peter in Alexandria, appreciate that call as well.

And I think we will take one final one and that is Richard who is on the central cost. Good day Richard how are you?

CALLER:

Good day Ross. Minister if the purchase price of the asset is in excess of $20,000, is the first $20,000 deductible?

MINISTER BILLSON:

No Richard that is what came up last night as a question on a motor vehicle over $20,000. That puts it above the instant asset write-off. That is where that asset pulling measure that I just spoke to Ross about comes into play.

So you would get to write-off 15% of that purchase price in the first year. You then slide it over into the asset pool and that gets a 30% deduction each year, and that presumes your turnover is under $2 million.

So that is how that operates and that is why we are really focused on small business taking the opportunity to invest where there is a chance to grow their business, improve their productivity, lift their game, enchant and delight more customers and it is very much about transactions of that kind.

Under $20,000, for actively trading businesses with a turnover of less than $2 million a year.

ROSS GREENWOOD:

Alright that is Richard in the central coast. I think Jim who is at Wavell Heights, I think you have got the same one as well have you Jim?

CALLER:

Yes that is right. I am sorry I have just come into the end of that. So if a bought a car for $25,000, it would go back to the old scheme.

MINISTER BILLSON:

That is right Jim. You would write the 15% off in the first year and then the balance would go into that pool or you might shop around and get a demonstrator model or maybe something that is under the $20,000 and then you could knock yourself out that way.

ROSS GREENWOOD:

So there you go Jim, under 20,000 grand is what you are looking for Jim in Wavell Heights. We appreciate that call and all of the others that are on the board right now.

The Minister for Small Business Bruce Billson. The architect of this scheme. The man who is behind it and that is who you can hear. A man who has got a very good knowledge of the way in which it works to be able to take your calls in that manner.

I have got to say Bruce we cooked this up because we saw so many calls on the board last night and you are so good with your time to come back to us tonight as well and we genuinely appreciate it.

MINISTER BILLSON:

Thanks Ross. And for all your listeners, if in doubt, get some good advice from your accountant. They know the ins and outs of the tax laws and make best use of this really useful measure to energise enterprise and put a spark in the small business economy.

ROSS GREENWOOD:

There he is selling that portfolio again. We love that. Bruce Billson have a great evening.