Expenses are now fully deductable in the year in which the expenditure is incurred (this was previously over five years) if it was:
•incurred in obtaining advice or services relating to the proposed structure or operation of the business (for example, advice from a lawyer or accountant); and
•a payment to an Australian government agency of a fee, tax or charge incurred in relation to setting up the business.
Example 1 – Start-up expense which can be immediately deducted
Maria & Co is a company that is a small business entity and is in the process of setting up a florist business, to be operated by a separate entity. Maria & Co is uncertain as to the best location for the proposed business and obtains advice from a consultant in order to assist in determining a suitable location. As Maria & Co is a small business entity and is intending to start-up a new business, the cost of obtaining this advice will be fully deducted in the income year in which it is incurred.
Example 2 – Capital expenditure which cannot be immediately deducted
Peter already carries on an established small landscaping business. As part of plans to expand and improve his business Peter obtains financial advice about financing the expansion. As Peter’s business is already established, he will not be able to immediately deduct these costs.