The SME $20,000 instant asset write-off: can you utilise this deduction?
Do SMEs understand the $20,000 instant asset write-off ?
Recent industry research suggests NO; it shows that up to two-thirds of businesses are underutilising this tax deduction.
This is NOW relevant for business entities with an aggregated trading turnover of under $10 million for the 2017 financial year!
What does ‘instant’ mean in this case?
Sadly, it doesn’t mean that you will get the cash back from the ATO. If you refer to business.gov.au, it says the following “it means that you can reduce your taxable income, and your tax payable, in the financial year that you bought and installed them.”
So what can you claim an instant deduction for?
Generally speaking, the deduction is primarily intended for physical assets.
- Equipment, vehicles, tools and electronics (such as computers and phones) can all be claimed as part of the scheme.
- There is no limit to how many assets you can claim the deduction for.
- Each asset must cost less than $20,000.
- The deduction only applies to assets used for business purposes.
- If an asset – for example a computer – is split between personal and business use, you can only claim the deduction on the portion that is used for business.
Exclusions from the instant deduction scheme include Software, along with “Capital works“ (take advice here) and Assets already allocated to a low-value pool.
Also excluded are assets that are leased out for more than half of the time on a depreciating asset lease and any Horticultural plants, including grapevines, as these are covered by specialised deductions.
Don’t DOUBLE DIP with a claim for depreciation in the current or a later year
Essentially, the write-off enables you to claim the depreciation deductions on the life of that asset in one go, up-front, therefore it can’t be repeated in future years.
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Source: Tax Institute