Instant Asset Write-off extended

Instant Asset Write-off extended

The Government continues to back small businesses with the announcement on June 9 that it will extend the $150,000 instant asset write-off by six months until 31 December 2020. Under the measure, the asset must be both acquired and installed ready for use by 31 December 2020, instead of 30 June 2020.

Businesses can claim an immediate deduction (the instant asset write-off) and reduce the tax payable when buying business assets such as machinery, cars, delivery vehicles, office furniture and display cabinets. The instant asset write-off is also available for second-hand assets (but not where you dispose of an existing asset and then buy it back).

These measures allow businesses that have an aggregated turnover of less than $500 million (grouping rules apply) to claim a deduction for a depreciable asset that costs less than $150,000 (after claiming any GST credits).

Australian businesses with annual turnover of less than $500 million will be able to take advantage of this extended timeframe to invest in assets to support their business as the economy reopens and Coronavirus health restrictions continue to be eased. The extension will give businesses additional time to acquire and install assets, as they will now have until the end of the year.

The instant asset write-off also helps to improve cash flow for businesses by bringing forward tax deductions for eligible expenditure. The threshold applies on a per asset basis, so eligible businesses can immediately write-off multiple assets provided each costs less than $150,000.

Instant asset write-off thresholds

 

Eligible businesses Date range for when asset first used or installed ready for use Threshold
Less than $500 million aggregated turnover 12 March 2020 to 31 December 2020

$150,000

Less than $50 million aggregated turnover 7.30pm (AEDT) on 2 April 2019 to 11 March 2020

$30,000

Note! If the asset is a car, the instant asset write-off is limited to the business portion of $57,581 (the car depreciation limit – this will increase to $59,136 from 1 July 2020).

Example

Jane owns a café which is a small business. In January 2020 she bought a new fridge freezer for $7,500 and a new espresso machine for $3,400. They are installed ready for use on 24 January.

Jane can take advantage of the instant asset write off for both items because each one costs less than $30,000.

In April 2020 Jane buys a new van for $43,650, which she immediately starts to use in the business. She can take advantage of the instant asset write off for the van because it cost less than $150,000. If she had bought and started using the van before 12 March 2020, the instant asset write-off would not have been available.

The instant asset write-off eligibility criteria and threshold have changed over time. You need to check your business’s eligibility and apply the correct threshold amount depending on when the asset was purchased, first used or installed ready for use.

Remember, registered tax agents can help you with your tax. Talk with our tax adviser before buying any business assets. In particular, the timing of when you first used an asset, of first install it ready for use, is important.

Source: The Tax Institute, Treasury

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