There has never been a better time to start-up a Small Business from a deductibility point of view. On 1st July 2015 the ATO changed their policy for claiming start-up expenses, often referred to as “black hole” expenses, for small business.
Black hole expenses can now be fully deducted in the year in which they are incurred, but only for small businesses (less than $2 million turnover *).
Previously the following expenses were required to be written off over a 5-year period.
- Advice relating to structuring or operations of the proposed business by Accountants such as Tactica Partners and/or Lawyers (i.e. costs to establish an entity, due diligence, business plan etc.)
- Costs associated with raising capital (whether debt or equity) for the operation of the proposed business (i.e. costs incurred in accessing crowd sourced equity funding)
Acquisition costs of assets that may be used by the business would not be included and would fall under the capital allowance rules.
Simon White is looking to establish a real estate business that will turnover less than $2million.
Simon engages Tactica Partners to advise him of the most suitable structure to carry on the real estate business and to establish the structure (White Estate Agency Ltd).
Also, Simon is uncertain as to the best location for the proposed business and the new company obtains advice from a consultant
As White Estate Agency is a small business entity and is intending to start-up a new business, the cost of obtaining this advice will be fully deductible in the income year in which it is incurred.
*Other conditions apply. Please contact Tactica Partners to discuss eligibility criteria for small businesses.
Please Note: Many of the comments in this article are general in nature and anyone intending to apply the information to practical circumstances should seek professional advice to independently verify their interpretation and the information’s applicability to their particular circumstances.