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Accounting vs Tax - Immediate Write Off

ThereMayT
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ThereMayT
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Accounting vs Tax - Immediate Write Off

Hi all,

 

I have a question about immediate write-off (IWO) for tax purpose vs depreciation in the books.

Everywhere I see the IWO issue being discussed from the tax perspective, and how the costs should be calculated/treated in the TR.

 

However, I'm interested in the accounting treatment for those assets.

If a (small) business uses the IWO in its TR, but records depreciation in its books based on effective life (diminishing value), and not using the simplified rules in the books, can it still write-off (in the books) new assets costing less than $20k? Or does it need to use the same method as per its other assets, i.e. effective life & DV rate?

 

Thanks in advance and Cheers,

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MYOB Moderator Hayden_B
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Re: Accounting vs Tax - Immediate Write Off

Hi @ThereMayT 

 

This is something I'd talk to an Accountant about, though we do have some experts on the Forum who may be able to provide some input.

 

Tagging in: @DuncanS @Kym__Yeoward @GDay53 @Julie_A_C @ronatbas 

 

I hope they might have some free time to lend a hand.


Cheers,

Hayden
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Ultimate Partner GDay53
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Re: Accounting vs Tax - Immediate Write Off

@ThereMayT 

 

Welcome to the MYOB Community Forum, I hope you find plenty of useful information.

 

Normally if it is a Immediate Write Off item then it is recorded as an Expense not a Capital Purchase.

 

If my response to your query and has helped, please mark my post as a solution to help others in the future.
Graeme Day
Registered BAS Agent #24745540
First Class Accounts Clayfield
Mobile: 0402 841 627
gday@firstclassaccounts.com
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Ultimate Partner Kym__Yeoward
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Re: Accounting vs Tax - Immediate Write Off

Just a note - I would add an Expense account line 6-xxxx for "Cap Exp  Items < $20,000"

 

Kym Yeoward

Darwin (Palmerston)

NT

Ultimate Partner DuncanS
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Re: Accounting vs Tax - Immediate Write Off

@ThereMayT  @GDay53  @Kym__Yeoward  @Hayden_B 

 

It is best to speak with your Tax Accountant.

 

By example, a Real Estate Agent buys two items being -

 

   a Photocopier for $1980    a Van for $19,800  ex GST being $1800 and $18,000

 

I would setup two Cards called Photocopier Manufacturers Name Model Name March 2019 and Van Manufactures Name Rego March 2019.

 

Some Accountants create a Asset Ledger and then journal a 100% Deduction.

Some Accountants create a Expense Ledger directly.

You can have a Expense Ledger see Kym's post or have a separate Expense Ledger for each item.

 

I recall some years ago that the ATO wrote that a Small Business Entity (SBE) should have Accounting Records that agree with a Tax Return (without Tax Return adjustments). Accountants used to addback then reduce the same amount of depreciation on the Tax Return. Fines may be adjusted in a Tax Return but I suggest that Fines should be recorded in Other Expenses and not included in figures that appear on the Tax Return. I do not have Tax Return Adjustments.

 

Duncan 

Duncan Smith
Business Advice + Tax
Helping business owners build a better business since 1998
E expressgst@optusnet.com.au T 02 9904 3672 7 days
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