The popular $20,000 instant asset write-off for small business ends on 30 June 2017. This concession enables small businesses to immediately write-off depreciable assets that cost less than $20,000.
Until recently, this instant write-off was only accessible to businesses with an aggregated turnover of less that $2 million. But, a last minute deal struck between the government and Senator Nick Xenophon to pass the enterprise tax Bill - containing amongst other things the tax cuts for business and a change in the small business threshold – will see up to 90,000 more businesses access the instant write-off.
While the Bill containing these changes is not yet law, we expect that it will be passed when Parliament next sits.
For those businesses that have not accessed this concession previously, it’s important to understand how you can take advantage of it before 30 June 2017.
What is the $20,000 instant asset write-off?
A deduction is generally available for purchases your business makes. The instant asset write-off however changes the speed at which you can claim a deduction.
Since 7.30pm, 12 May 2015, small businesses have been able to immediately deduct business assets costing less than $20,000. On 30 June 2017, this $20,000 deduction limit reduces back to $1,000. When we say “immediately deductible” we mean that your business can claim a tax deduction for the asset in the same income year that the asset was purchased and used (or installed ready for use). The deduction is claimed on the business’s tax return.
If your business is registered for GST, the cost of the asset needs to be less than $20,000 exclusive of GST. If your business is not registered for GST, it is $20,000 including GST.
Assets costing $20,000 or more can be allocated to a pool and depreciated at a rate of 15% in the first year and 30% for each year thereafter.
The instant asset write-off only applies to certain depreciable assets. There are some assets, like horticultural plants, capital works (building construction costs etc.), assets leased to another party on a depreciating asset lease, etc., that don’t qualify - check with us first if you are uncertain.
Also, you need to be sure that there is a relationship between the asset purchased by the business and how the business generates income.