The government has legislated and extended the temporary arrangement for a further year until 30 June 2020. The extension of the instant asset write-off for a further year is great news for small businesses who may be planning to purchase assets for use in their business in the near future. The key is for businesses to ensure the asset will be used in their business (or ready to use) in the year they claim the write-off, and to consider how any private use of the asset may affect their claim.
The write-off is a temporary measure that allows small businesses to claim an immediate deduction for certain capital expenditures, rather than having to deduct these costs over time. This “accelerated” depreciation deduction improves small businesses’ cashflow and encourages them to reinvest amounts back into their business.
What are the eligibility requirements?
If you have a business with an aggregated turnover of less than $10 million from 1 July 2016 onwards, you can access the instant asset write off. If you have a business with an aggregated turnover from $10 million to less than $50 million you may be eligible for the instant asset write off for assets purchased from 7.30pm (AEDT) on 2 April 2019.
What are the asset cost thresholds?
The asset cost threshold has increased to $25,000, with effect from the date of announcement as at 29 January 2019 until 2 April 2019. The asset cost threshold has increased further to $30,000 for asset purchases from 7.30pm (AEDT) on 2 April 2019 until 30 June 2020.
Assets costing more than the threshold do not qualify for the instant write-off. Instead, those assets are added to a “small business pool” of depreciating assets and their costs are deducted over time (broadly, a 15% deduction in an asset’s first year and a 30% deduction in later years, with the balance of the pool written off once it drops below the instant asset write-off threshold).
Is your business planning to purchase new assets?
Talk to us today for advice on how to fully utilise the instant asset write-off. The extension of the write-off may open up tax planning opportunities for your business, depending on your capital expenditure needs, cashflow position and when any new assets will be installed ready for use in the business.