When we look at purchasing things in our business, there’s kind of two ways to treat them:
The first, is if you’re buying consumables, where you might use them in the work that you do -for Accountants, it’s a little bit tough. We might be consuming pens and stuff as we work – but let’s say in the context of building a house there’s all that equipment, all the timber, all that goes into building a property. So, for a builder, they can instantly claim that stuff as the cost of the goods sold, or in the case of paper and pens at Inspire, we claim that as expenses. So, they’re not assets. Once they’re used, they’re gone. So that’s one lens to look through.
The other one is if you buy a piece of equipment (and we often call that an asset that you’re going to be using over a long time to sort of make money off in your business) generally, we can’t write that off in a single year. In accounting land and tax land, we usually have to write that off over a number of years.
When COVID hit, they announced an interesting measure where it said that there’s a temporary full expensing of any asset that you’ve purchased, which I’ve never heard of in my working career. It basically says if your turnover is under $5 billion, then you can claim the full cost of an asset up to 100% of its cost. Now that includes things like (and I’ll do an asterisk on cars) but cars, equipment, machinery, printers, laptops – not necessarily the timber and steel I mentioned before that builds the house, but the equipment that you use to build the house. So there’s no limit now on the amount you can spend, and that was eligible from the 6th of October 2020, through to 30th of June, 2022. So we’ve got just over one full financial year to use this, almost like a concession, or temporary full expensing. So it’s pretty cool.
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