The increase to the instant asset write-off to $150,000 has been extended to 31 December 2020 as part of the Government Stimulus Package.
The instant asset write-off helps to improve cash flow for businesses by bringing forward tax deductions for eligible expenditure.
What is it?
The instant asset write off means that qualifying businesses can claim a tax deduction for each asset purchased and first used or installed ready for use by specific dates & up to the amounts below.
If you run a business and choose to use the simplified depreciation rules, you must use instant asset write-off on all eligible assets.
Businesses with total ordinary income of your business and that of any associated businesses is less than $500 million (after 12 March)
The date you purchased the asset
When it was first used or installed ready for use
The cost of the asset being less than the threshold (see above)
Common questions answered
- If your business has a small profit or even a loss, the write off will be of little or no benefit in the current year (losses are not refundable but can be carried forward to the next year)
- The asset can be new or second hand
- To be eligible, the asset must be purchased by a business turning over less than $50m or $500 million after 12th March 2020 (see above)
- The amount of the asset must be under $150,000 (depending on date of purchase – could be $30K or $25K or $20K) exclusive of GST (i.e. $165,000, $33K, $27.5K or $22K including GST)
- If you borrow to purchase the asset, the asset is still eligible
- The asset must be installed and ready to use by the deadline
- Note: purchasing a car or equipment to be delivered in July 2020 or later won’t qualify until the car is actually delivered or equipment is installed ready for use (see example below)
- To claim the write off on a motor vehicle you will need to have a valid log book and claim only that percentage of the cost as an immediate write off
- If you purchase a car for your business, the instant asset write-off is limited to the business portion of the car limit of $57,581 for the 2019–20 income tax year
- Trade-ins will form part of the asset cost and does not reduce the cost of the asset
- Building structural improvements are not eligible for the instant write off
- If your pool balance at the end of the year is less than $30,000 before applying any other depreciation deduction, the entire pool balance can be written off ($150,000 if purchased post 12th March 2020)
Common types of assets in business
Motor vehicles, equipment, plant, computers, furniture, tools etc
You must use the general depreciation rules for the following depreciating assets – as they are specifically excluded from the simplified depreciation rules:
- assets that are leased out, or expected to be leased out, for more than 50% of the time on a depreciating asset lease
- assets you allocated to a low-value assets (pool) before using the simplified depreciation rules
- horticultural plants including grapevines
- software allocated to a software development pool (but not other software)
- capital works deductions
If you purchase a car (a passenger vehicle, except a motor cycle or similar vehicle, designed to carry a load less than one tonne and fewer than nine passengers) for your business, the instant asset write-off is limited to the business portion of the car limit of $57,581 for the 2019–20 income tax year.
To claim the write off on a motor vehicle you will need to have a valid log book and claim only that percentage of the cost as an immediate write off For example, if you use your vehicle for 75% business use, the total you can claim under the instant asset write-off is 75% of $57,581, which equals $43,186
Accelerated Depreciation Deductions
Newly acquired depreciating assets valued at more than $30,000 (or $150,000 post 12th March 2020) and not applied the instant asset write off deduction to, can be added to the general business pool.
As part of the backing business incentive, an accelerated depreciation deduction of 57.5 per cent for the business portion of the new depreciating asset applies for the cost of an asset on installation from 12th March 2020 to 30th June 2021 and existing depreciation rules apply (15 per cent for the first year and 30 per cent for subsequent years) to the balance of the asset’s cost and for subsequent years.
There is no limit to the cost of a qualifying depreciating asset eligible for this concession, but the asset must be new and not second hand.
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This information is intended to provide general information only and has been prepared without taking into account any particular person’s objectives, financial situation or needs. Before acting on such information, you should consider the appropriateness of the information