Take advantage of a $30k instant asset write-off

The 2019-2020 Federal Budget announced a series of measures, some of which were legislated before the election was called. One of them was the extension and increase of an instant asset write-off for small businesses.

The instant asset write-off was first introduced back in 2015 and has been extended every year since then. It has been a big win for small businesses that need to purchase equipment, as well as to those selling it. The 2019-2020 federal budget has extended this initiative until 30 June 2020 and increased the threshold.

What is an instant asset write-off?

An instant asset write-off allows small businesses with an annual turnover of up to $10 million to claim immediate deductions (up to a limited amount) for a new or second-hand equipment asset purchases, such as vehicles, tools and office equipment.

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.

How much can I write-off?

The amount you can write-off instantly will depend on when the asset was purchased. The thresholds have changed over the past few years – the new laws have increased the threshold from $25,000 to $30,000.

To qualify for the higher threshold, the assets will need to be used or installed ready for use from 02 April 2019 until by 30 June 2020. Anything previously purchased does not qualify for the higher rate, but may qualify for the $20,000 or $25,000 threshold. Similarly, anything purchased but not installed ready for use by 30 June 2020 will not qualify.

Instant asset write-off thresholds:
$30,000 – 02/0/2019 – 30/06/2020
$25,000 – 29/01/2019 – 02/04/2019
$20,000 – 12/05/2015 – 28/01/2019

The new laws also enable businesses with turnover from $10 million or less than $50 million to access instant asset write-off. These businesses can claim a deduction of up to $30,000 for the business portion of each asset, purchased and first used or installed ready for use from 2 April 2019 until 30 June 2020.

Note that the entire cost of the asset must be less than the instant asset write-off threshold.

For assets costing $30,000 or more

Assets costing $30,000 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. If the closing balance of the pool, adjusted for current year depreciation deductions (i.e. these are added back), is less than $30,000 at the end of the income year, then the remaining pool balance can be written off as well.

The ‘lock out’ laws for the simplified depreciation rules (these prevent small businesses from re-entering the simplified depreciation regime for five years if they opt-out) will continue to be suspended until 30 June 2020.

Does the threshold include GST?

Whether the threshold is GST exclusive or inclusive will depend on your GST status. In short, if you are registered for the goods and services tax, you exclude GST amount from the asset when you calculate the depreciation amounts. If you are not registered for GST, you include the GST amount.

For more information about GST impacts, visit ATO website.

Before making any large purchases, speak to the team at ZenFind Accounting to assess how the asset will benefit your business and how the purchase may impact your cash flow.