MrQuade wrote: ↑
Mon Jun 01, 2020 12:38
Less about the tax benefit as such, but more about the fact that you'll immediately be getting about a third of the cost back in your pocket. Means the effective purchase price is very much discounted. I've never been able to justify my home PC as a work expense, so haven't looked into the strategy of depreciating cost over the course of several years, but I understand that the whole cost of the PC can be recovered eventually. (definitely not an Accountant here!!)
I'm not an accountant either, but I have been doing my own books for quite a while. Most people appear to over-value the tax related benefits of their purchases. First of all the only difference between purchasing at the end of the financial year vs any other time is only
if you do annual returns and are quick to prepare them. If you are doing quarterly returns, the adjustments happen during the year and you get your deduction applied before
you pay any tax. The benefit there is the delay between you paying the provisional or estimated tax and receiving the refund. Purely a cash flow aspect, the amount does not change. The current tax scheme has generous instant asset write off limits, so you don't have to depreciate items over years and years. That's good, because some items depreciate so slowly that you still have them on your books long after the end of their useful life. Keeping those depreciation schedules and handling asset disposal paperwork is a royal pain in the butt. But I digress...
Returning to how much money it actually saves you... As an example, let's take a $2k purchase that is written of in the same financial year. That means that you can only claim a deduction in the current financial year, but not subsequent ones, which is actually the better option. The first three tax brackets are:
Code: Select all
Taxable income Tax on this income
0 – $18,200 Nil
$18,201 – $37,000 19c for each $1 over $18,200
$37,001 – $90,000 $3,572 plus 32.5c for each $1 over $37,000
If your gross income is $80k, the tax savings after applying the $2k deduction are $650. If you only make $35k, the tax reduction is $380. But that still implies having to part with $1,350 or in the case of the poorer person, $1,620. All this assumes that such an expense is directly related to earning your income and it is a 100% deduction. In practice that means you are probably running your own business, have to be registered for GST and are probably doing quarterly BAS statements. The cost of administering the tax paperwork probably wipes out half of that tax benefit!
Hence my comments about over-valuing the tax benefit and not factoring it into purchasing decisions. Any business related expense will reduce your tax liability, so business spending needs to apply uniform rules - cost / benefit analysis. Your electricity bills reduce your tax liability at the same rate as a new HDD.
Back to the more exciting aspect, I was careful to choose vendors that showed each item as "in-stock" so hopefully I'll have something to show for it at the end of the month, once everything is delivered, assembled and tested. Maybe a whole set of SDKs and a new beta. I should put myself through the pain of doing those builds on the current system and then on the new system and compare the timing figures. That will allow me to put a figure on the cost / benefit analysis.