The Government budget in May was notable for one major change with the introduction of the investment boost to encourage businesses to invest in new assets. The 20% writedown in the first year on the cost of the asset has been well received by the business sector. Clients will need to remember that the 20% claim in the first year is not a writeoff of the asset value but an extra depreciation charge, which is retained against the cost of the fixed asset. There is therefore the potential for this depreciation expense to be recovered on the sale of the asset, depending on the written down value of the asset in the books at the time of the sale. Software providers of accounting software will no doubt be amending their software so that the investment boost write off can be clearly recorded against fixed asset values.
On the taxation front, Inland Revenue has released its interpretation of the treatment of motor vehicle expenses claimed by businesses, which tightens up the deductibility of such expenses, especially where the vehicle is used for both business and personal use by business owners or their employees. Businesses will need to be aware of these interpretations when processing motor vehicle expenses in their accounts.
Finally, please remember that from 1 April 2024, trusts with trading profits over $10,000 per annum will pay income tax on their profits at the highest income tax rate of 39%.
If you have any queries over tax or accounting issues, please get in touch with our office for further explanations.
