The instant asset write-off explained
Have you heard of the Government’s instant asset write-off?
If you haven’t, it’s worth tuning in. The scheme allows eligible businesses to potentially claim an immediate tax deduction for qualifying assets up to $150,000. It has been extended until June 30, 2023.
Here’s a quick overview of how the instant asset write-off works and how small businesses can benefit.
What is the instant asset write-off?
Under the instant asset write-off, eligible businesses (with an annual aggregated turnover of less than $500 million) may be able to claim an immediate deduction for the business proportion of the cost of new or second-hand plant and equipment asset purchases.
Examples include tools and equipment, computers, office furniture and motor vehicles.
Certain types of assets do not apply, such as capital works (buildings and structural improvements) and horticultural plants.
The deal is the assets must be used or installed for use in the year you intend to claim them in.
What’s great is that the instant asset write-off can be used for:
- Multiple assets if the cost of each individual asset is less than the relevant threshold
- New and second-hand assets.
How much can you write off?
How much you can write-off depends on when you bought the asset and the associated threshold amount.
You can find more information about the latest thresholds on the ATO website.
Example of how it works
The instant asset write-off can lead to tax benefits for your business. Here’s an example:
You’re an eligible business (with less than $10 million in aggregated turnover) that has used or installed an asset ready for use between March 12, 2020 and June 30, 2021 (having previously purchased it between 7.30pm on May 12, 2015 and 31 December 2020).
The threshold for the instant asset write-off would be $150,000.
Considerations before diving in
Before buying an asset or equipment for your small business, it’s important to speak to your accountant or a tax expert about the implications. They can verify that you are in fact eligible for the instant asset write-off.
It’s also important to consider how the purchase may impact your cash flow or finances. Any purchases should align with your business goals and overall business strategy.
How do I claim the instant asset write-off?
If you meet the eligibility requirements and the asset falls under the relevant threshold, you can claim the business portion of the asset’s use in that financial year.
The ATO website provides examples of how to claim the instant asset write-off.
What if the cost of the asset is more than the threshold?
If the cost of the asset is the same as or more than the relevant instant asset write-off threshold, the asset must be placed in the small business pool, where you may be able to claim gradual deductions (depreciation) each year.
Like to know more?
Getting your head around the instant asset write-off rules can be confusing, so it’s best to seek expert advice from your accountant or tax advisor before proceeding.
To find out more about financing your asset or equipment purchase, speak to us. As your broker, we’ll save you time shopping around, give you access to a broad range of financing solutions and offer specialist knowledge. Get in touch today!
The information provided is general information only and has been prepared without taking into account your objectives, financial situation or needs. We recommend that you consider whether it is appropriate for your circumstances. Your full financial situation will need to be reviewed prior to acceptance of any offer or product. This article does not constitute legal, tax or financial advice and you should always seek professional advice in relation to your individual circumstances. Subject to lenders terms and conditions, fees and charges and eligibility criteria apply.